News

Naira crashes against dollar at black market

Published

6 years ago

November 30, 2018

The naira weakened by one per cent on the black market on Thursday to 370 against the United States dollar , its weakest since August 2017 .Traders said some black market outlets were hoarding dollars , fearing a recent sharp fall in oil prices could lead to a shortage of the US currency , according to a report by Reuters on Thursday .

Global prices of oil , Nigeria ’ s chief export , have dropped more than 20 per cent this month . Traders now fear that the Central Bank of Nigeria may not have enough reserves to defend the currency against a possible further weakening of oil prices as foreign investors have been pulling money out of Nigerian assets .

“ There ’ s no new investment coming in and oil prices have been dropping , so investors are watching while some are exiting , ” one trader said .

The central bank has been using up foreign exchange reserves to keep the naira stable , spending $ 2 . 2 bn in October to prop up the currency as foreign investors have also left the market in favour of rising interest rates in developed economies .

The CBN data released on Thursday showed that the nation ’ s foreign reserves stood at $ 41 . 9 bn as of November 27 , down 12 . 3 per cent from a peak of $ 47 . 8 bn reached in June .

Investors have also been pulling out funds from equities . On Thursday , the benchmark stock index fell by 1 . 33 per cent to 30 , 611 basis points .

The naira also weakened on the over -the -counter market where it is traded by banks . It was exchanged for between 364 and 364 . 50 to the dollar on Thursday , compared to 363 a week earlier . At forex bureau, it was quoted at 366 per dollar , while a unit fetched 306 . 30 on the official market.

The central bank has kept the official rate stable at N 306 . 30 / $ 1 for over a year by frequently intervening in the market .

The CBN on Tuesday said it intervened in the wholesale segment of the foreign exchange market, with $ 100 m to dealers in that window .

In the latest intervention , it said it also made interventions of $ 55 m each in the Small and Medium Enterprises and invisibles segments to meet the needs of customers .