Exchange rate hits N400/$1 at the parallel market as summer holiday hikes demand

Nigeria’s exchange rate dropped to a new low of N400 to the $1 at the parallel market on Thursday. This is the lowest we have seen the naira drop on the parallel market and the lowest since the CBN floated the naira.

The exchange rate hit an all time low of about N410 to $1 back in February 2016 as Nigerians reacted negatively to a rash of new CBN policies that artificially restricted the demand for dollars.

This time around, foreign currency analysts say that the reason for the drop was due to the continued pressure on the retail end for Nigerians seeking to fund their holiday expenses abroad. This is further exacerbated by their inability to obtain forex at the official interbank window.

The CBN last week tried to inject some liquidity in the retail end by instructing commercial banks to now start selling dollars deposits from foreign remittances to BCD’s. However, the impact of this is yet to be seen in the retail end leading to the further depreciation of the naira.

The disparity between the official and black market exchange rate has now widened to as much as 21% about 4 times our preferred margin of about 5%- 7%.

Is it a bubble?

Some speculators are watching this trend and wondering if we could have a repeat of what happened in February when the exchange rate crashed from as high as N410 to under N330. However, the parallel market exchange rate has been on s steady increase from the N345 it was when the Naira was officially floated to about N400 on Thursday. Therefore, if this is indeed a bubble then it has been on for almost two months now which could mean that this price may just about stick longer than expected.

Parallel market operators opine the slide may continue throughout the summer break except we have a reverse in fortunes at the interbank market where the CBN has remained the sole seller of dollars in the market,

Join our BBM channel for instant updates : C0030863D

Comments

BOOM: Nigeria’s External Reserves Drops To Lowest In 11 Years

Nigeria’s foreign exchange reserve fell to $25,780,765,483 (25.78 billion) as of August 16, the lowest we have seen since 2005. The drop was down 2.11% from a month ago. The Nations external reserves dropped below $26 billion for the first time on the 5th of August 2016 after it closed at about $25,971,610,949. In fact, the external reserves has dropped by about $480 million dollars in August alone compared to just $100 million in the whole of July. Ironically, the current balance of $25.9 billion is worth about 80% more than what it was in Naira following the depreciation of the naira after it was floated. The CBN has in the past few days ramped up sales of dollars at the interbank in the hope that it will create liquidity in a market that is yawning gape to swallow forex after nearly almost two years of intense rationing by the CBN. The Naira weakened to its lowest ever at the interbank after it closed at about N362.5/$1 in midday trading. The Naira will eventua...

Why Entrepreneurs Should Engage Their Spouses in the Business

When her husband first joined a startup, a woman I’ll call Cindy had saved up a comfortable nest egg for her family. Even with several young children, their financial situation was stable enough that their personal risk in the venture seemed minimal. But a year later, when the seed funding dried out and no substantial revenue was forthcoming, things went downhill for them. Her husband stopped receiving a salary, yet continued working and traveling extensively for the company. Cindy had to care for their children, including two toddlers and two autistic preteens, mostly on her own. She begged her husband to find another job, but he didn’t want to leave a business that he had already invested so much in. She offered to go back to work and have him watch the kids; he refused. Within two years, their financial reserves and their children’s college funds had disappeared entirely. Their home was eventually foreclosed on, and the family had to move in with a relative. Onl...

Emefiele gives insight, on what to Expect during his second term

The newly re-appointed Governor of the Central Bank of Nigeria, Godwin Emefiele, over the weekend enumerated the things intends to accomplish during his second term in office. Emefiele enumerated his plans while speaking to journalists at the University of Nigeria Nsukka (UNN), on the sidelines of the institution’s Special Convocation which took place on Friday. The CBN Governor gave delivered a lecture at the event. Driving down inflation: According to Emefiele, he intends to focus on policies that would drive down the country’s inflation rate, improve price stability, and drive economic growth. Emefiele’s Stern Warning: The CBN Governor further disclosed that he plans to work with his team to drive down imports and encourage exports. He also used the occasion to issue a stern warning to those who meddle with policies aimed at achieving economic stability, telling them that they will be caught and punished by law. Mr Emefiele’s second term plans came just a few days after ...

The Finance Dude

Search This Blog