By InvestAdvocate
Lagos (INVESTADVOCATE)-The Central Bank of Nigeria (CBN) on Thursday said it will not focus on the naira reaching new record lows in the black market saying its insignificant in the determination of naira exchange rate, a Reuters report quoted Ibrahim Muazu spokesman for the CBN.
The report says the naira declined to a low of N235 to the dollar on the parallel market on Thursday, N1.50 down on the day, as dollar shortages persisted, quoting a trader.
“There is need to deemphasize the parallel market. How can less than one percent be determinant of the rate? Most of those going that way are those that don’t want to be documented,” Reuters quoted Muazu.
According to the report, the CBN worried about rising inflation, has said it is in no mood to devalue the naira again, after it tightened access to hard currency for the import of a wide range of goods.
Since the measures, the naira has weakened steadily on the black market, the report affirmed.
It quoted analysts as saying the measures risked diverting dollar demand to the black market, worsening investor perceptions about policy in Nigeria and delaying a decision to devalue the naira to fully reflect weak prices for Nigeria’s oil exports.
Reuters quoted Aminu Gwadabe, president of Nigeria’s Bureau de Change association as saying that people were buying dollars on the parallel market to protect themselves against further naira weakness.
The CBN’s interbank rate is pegged at N196.95, investors questioned how long the bank’s rate could hold there, when the currency was trading further and further away on the parallel market, according to Reuters.
It quoted Muazu as saying the official interbank market had the capacity to handle legitimate dollar transactions but that people preferred to use the unofficial parallel market for undocumented transactions.
Nigeria’s central bank has spent around $5 billion since January defending the naira, hit by last year’s plunge in oil prices.
The CBN said on Wednesday Nigeria’s foreign exchange reserves had started to recover gradually with its management of dollar demand and government’s effort to plug all leakages.
Nigeria’s reserves stood at $31.89 billion on July 7; however CBN’s moving average data showed reserves at $29.63 billion on July 7.
