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Foreign exchange rate in Nigeria: Naira crashes to 288 against the dollar

What is the reason of the current exchange rate? What does it mean and what consequences it has? Find out it now!

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Naira crash

The naira fell by 31 per cent to 288.85 against the United States dollar. It happened on Monday at the close of trading at the newly established interbank market.

The local currency also depreciated at the parallel market. It closed at 346 to the greenback, down from around 330 and 335 on Friday. Last week the Central Bank of Nigeria represented new guidelines for the foreign exchange.

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The naira pegged at 197-199 per dollar before the emergence of the new forex policy. The forces of demand and supply will determine the value of the nation’s currency after the CBN allowed it to float freely.

It cleared a total foreign exchange demand backlog of $4bn with a dollar exchanging for N280 at the foreign exchange market.

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The statement of Apex Bank

The Apex Bank expressed satisfaction with the market performance. The statement was issued by in a statement issued on Monday by the Acting Director,  Mr. Isaac Okoroafor.

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The statement expressed the opinion that the objectives of the CBN are to clear the forex demand backlog as well as to perform its role as strictly a market intervention participant. Finally, CBN is aimed at re-launching a functioning and efficient interbank market.

Mr. Isaac Okoroafor concluded that the FX demand backlog has now been cleared and behind us for good.

Ecobank opinion

Mr. Kunle Ezun is a currency analyst at Ecobank. He said that when the market opened in the morning, the naira went up to 285 to the dollar  But later it came down to 255 to 260. It had happened before the CBN intervened in the market by selling over $500m at the rate of N280 per dollar.

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He also sais that they didn’t have any firm deals. They saw price discovery.

There were a lot of quotes that that day. The banks were willing to quote.  Everybody wanted to buy, not to sell until the CBN came to the bank later in the day to sell. It is explained by the fact that when the CBN sells to you, you are expected to sell in the market. So the activity in the market was created.

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A currency analyst at Ecobank also told that this situation can be called a market depreciation of the naira to 280. Further depreciation depends on how much the CBN is willing to supply to the market. If they can supply what they supplied on Monday in two or three times consecutively, the market will become calm.

READ ALSO: Naira to dollar: is it another rapid drop of the national Nigerian currency?

The opinion of the Head of Research and Investment Advisory

Mr. Sewa Wusu is the Head of Research and Investment Advisory in Sterling Capital. He said that naira closed at 288.85 after a little bit of oscillation. He also added that the interplay of demand and supply has started.

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He, however, said foreign portfolio investors might still be on the sidelines to watch developments. They need to see how the current mechanism would play out before they would begin to have some level of comfort on the level of dollar liquidity.

The opinion of the President of Association of Bureau De Change Operators of Nigeria

The President of Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadabe knows the reason of naira crash.

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He thinks that the naira fell to 346 against the dollar at the parallel market, because “the interbank market has not effectively taken off.”

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