Naira Drops To 370-Naira Per Dollar, Its Weakest Since August 2017
Nigeria’s local currency, the Naira is seeing a declining fortune after a relatively stable run for over a year.
On Thursday, the naira weakened by 1% on the black market to 370-naira per 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 U.S. currency.
Global prices of oil, Nigeria’s chief export, have dropped more than 20% this month. Traders now fear that the Central Bank of Nigeria, CBN 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 CBN has been using up foreign exchange reserves to keep the naira stable, spending $2.2 billion in October to prop up the naira.
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 foreign exchange bureaus 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 306.30 for over a year by frequently intervening in the market.
Dollar shortages could worsen, traders say, as investors close their books for the year unless the central bank increases its intervention in the foreign exchange market, Reuters reports.
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