The challenges facing the economy in the coming year in the face of dwindling oil prices was underscored yesterday as the naira lost 962 kobo to the dollar at the Nigerian Inter-Bank Foreign Exchange Market (NIFEX), the highest single loss in more than three years.
At the spot NIFEX, the offer rate depreciated from N119.9025 on Monday to N129.00 yesterday, a fall of N10.
This huge loss is coming barely a week after the national currency recorded its first major depreciation in the last three years at the inter-bank foreign exchange market.
In what some analysts say be the beginning of a free fall, the trend continued Monday; losing 700 kobo against the United States dollar.
The naira, which had recorded relative stability over the last three years, also lost 111 kobo against the dollar Monday at the official market – the Wholesale Dutch Auction System (WDAS).
It had last Wednesday depreciated by four kobo against the dollar.
The inter-bank foreign exchange market is where banks, on behalf of their customers, buy foreign exchange from one another to meet their daily needs, while the WDAS moderated by the Central Bank of Nigeria (CBN) is the official market where foreign exchange end users through their banks bid for foreign exchange.
Last week, the naira dipped to 117.95 to the U.S. dollar in the inter-bank market on Tuesday from 117.90 on Monday after the central bank slashed its forex sales to retail banks at auction, traders said.
The regulator sold $392.26 million to retail banks on Monday compared to $813 million at a previous auction after it rejected dollar bids from some institutions, dealers said.
“There was a dearth of dollars in the market, while demand for the greenback remained strong,” one dealer said. “Many banks that failed in their bids had to resort to buying dollars at a higher cost in the inter-bank market.”
Traders said the injection of November monthly budgetary allocations into the system further raised the amount of naira cash available to chase the few dollars in the market.
Bankers said anticipated dollar inflows from oil companies’ month-end sales beginning from Wednesday could help reduce the demand pressure and support the naira rally in the short-term.