The Nigerian naira has continued its shambolic performance against the dollar as it has crashed to a woeful level for the first time.
On Wednesday, the naira exchanged at 382 to 390 against the dollar at the parallel market as the scarcity of foreign exchange worsened. This is the worst it has reached since the beginning of the year.
The local currency has been under persistent pressure against the greenback owing to dollar scarcity at both the interbank foreign exchange market and the black market.
The shortage of forex at the interbank market, owing largely to scanty intervention by the Central Bank of Nigeria after the total floating of the naira, has led to gradual and continued depreciation of the currency at both markets.
After closing around 378 against the dollar for most part of last week, the naira dropped to 380 on Friday before falling to 382 on Monday.
The naira closed at 311.06 against the dollar at the interbank market on Wednesday. After hitting an all-time low of 334 last Wednesday, the currency has been hovering around 310 and 330 at the interbank market.
The local currency had depreciated from 280 to over 300 per dollar after the CBN floated the currency completely some weeks ago.
While linking Wednesday’s fall to the summer rush, economic analysts said a depreciating naira at the parallel market portend great danger for the economy.
They argued that since most companies were sourcing forex at the parallel market due to the scarcity at the interbank market, cost of goods and services were set to go up further.
“If the naira continues to fall against the dollar at the parallel market, it means the inflation and the contraction in economic growth we are experiencing now will worsen,” the Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chuwkwu, said.
He added, “Our capacity to defend the naira is getting weaker and weaker. And like I have said before, we need a budget support facility of say at least $10bn from the International Monetary Fund to stabilise the currency. We will need this to calm the market and foreign investors will have the assurance to come in.
“As it is now, there is no limit the naira will depreciate to now that the foreign investors will be attracted to come in. We need stability in the market for them to come.”
An economic analyst and Head, Research and Investment Advisory, Mr. Sewa Wusu, who linked the depreciation of the naira to the summer rush by holidaymakers abroad, said, “The issue still bothered on scarcity of forex in the economy.”
He stated that it was high time all critical stakeholders made moves to get the economy back on track.
Wusu said experts must work with the economic managers and other stakeholders to chart the path to recovery.