Naira Falls to Weakest Level In 6 Weeks at Black Market Despite CBN Modifying rate

It altered the rate at which bureaux de change could sell the naira from 386 by 1.56 percent to 392 per dollar, CBN said in a circular issued by Bloomberg to dealers on Monday.
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For the third time in 2020, the Central Bank of Nigeria (CBN) has weakened the local currency while seeking to curb dollar demand in the face of sluggish foreign currency inflows into the Nigerian economy.

It altered the rate at which bureaux de change could sell the naira from 386 by 1.56 per cent to 392 per dollar, CBN said in a circular issued by Bloomberg to dealers on Monday.

The regulator announced that traders would purchase the greenback from N384 at N390, further specifying that foreign money transactions would be carried out at banks at a rate of N388 per dollar, compared to the previous rate of N382.

In March and July of this year, Naira had been devalued, and the new currency weakening came at a time when Africa's largest crude exporter was fighting lower than budgeted oil prices, along with instability in its economy following the pandemic outbreak.

A sharp decline in a country's foreign exchange inflows, which relies on crude oil for more than 90 per cent of its forex earnings, implies higher pressure on its international reserves, thereby straining the naira.

Mosope Arubayi, the chief economist at Lagos-based Vetiva Capital Management Limited, said:
“oil prices didn’t recover strongly as many had anticipated with the reopening of the economies.”

She added that the depreciation

"basically signifies some pressure on CBN right now."

At the official currency market called the Investors & Exporters window, the U.S. dollar sees minimal liquidity, where the regulator operates a fairly rigid rate and the development has shot up dollar requirements on the black market, where the rate is flexibly calculated.

According to figures from abokiFX, a website that compiles parallel market rates, Naira traded at 500 per dollar on Monday, its lowest level since 22 February 2017.

The black market rate, standing at 388.54 a dollar, is 22 per cent lower than the actual official rate.