By Oludare Mayowa and Chijioke Ohuocha
The value of Nigeria’s latest naira exchange rate, set specifically for portfolio investors, eased for a second straight day on Wednesday even as the central bank stepped up dollar sales on the spot and forward markets.
The naira closed at 380.39 on the new foreign exchange trading window introduced by the central bank for investors, data from market regulator FMDQ OTC Securities Exchange showed, after it opened at 378.54 to the dollar.
Official interbank market rate for the currency was quoted at 305.90 naira. It was 388 naira on the black market on Wednesday.
The central bank said on Monday it would allow investors to trade the naira at market determined rates, a move intended to improve the dollar supply and attract foreign investors that fled the country at the start of the latest currency crisis.
This move introduces yet another exchange rate to the five existing ones. Still, analysts doubt the move is sufficient to draw inflows into Africa’s biggest economy.
“The new window reflects the true value of the naira,” one trader at a major Nigerian bank, told Reuters. “Once the central bank reduces intervention on the interbank market the naira will trade closer to the new window.”
Nigeria is battling a currency crisis brought on by low oil prices, which has tipped its economy into recession and created chronic dollar shortages.
It has created multiple exchange rates to help mask the pressure on the naira – including for Muslim pilgrims and for paying school fees – but wants to attract foreign investors with the new market determined exchange rate and at same time maintain a strong currency to ward off import-induced inflation.
The central bank on Wednesday said it sold $3.14 million on the spot market and $182.72 million as currency forwards to intensify its intervention to meet dollar demand.
“Our reserves stand at above $31 billion and that provides us enough of firepower or ammunition to be able to defend the currency,” the bank said in a statement.
SOURCE: REUTERS
