Nigeria’s Naira Currency Crashes To N173 Per Dollar.

The naira has crashed to N173 per dollar in the parallel market in response to scarcity of foreign exchange in the market.


This represents depreciation of 1000 kobo or  6.1 per cent when compared N163 per dollar which was the exchange rate as at end of November.
Financial Derivative Company confirmed this in its Economic Bulletin released yesterday. It said, “The naira also weakened at the parallel market to a YTD low of N176 per dollar as a result of the demand spill-over from the interbank market. As at December 31st, the exchange rate closed at N173.5 per dollar”.
Foreign exchange dealers attributed the massive depreciation of the naira to the restrictions introduced by the Central Bank of Nigeria, CBN, in October.
Among other things, the apex bank banned collection of proceed of international money transfer in foreign exchange, and also banned importation of foreign currency. The CBN also pegged the amount foreign exchange banks can sell to Bureaux De Change to $250,000 per BDC per week.
“The problem is that the banks are not selling to anybody”, said Mr. Harrison Owoho, Managing Director/Chief Executive, H.J Trust BDC.
“For more than two weeks now the banks have stopped selling foreign exchange to BDCs. There is no dollar in the market because CBN has also stopped people from collecting money transfer in dollars. Maybe things will change when we enter the New Year, when there is new policy.
Though the naira remained relatively stable in the official and interbank market in 2013, experts, however, believe the naira would experience significant depreciation in 2014.
According to Bismarck Rewane of Financial Derivative Company, the naira’s official trading band will rise from N150-160 to  N155-165 with midpoint at N160. He made these predictions at the Lagos Business School year-end review.
Similarly Razia Khan of Standard Chartered predicted that the middle point of the official exchange rate would rise to N160 per dollar. She said, “The CBN is likely to defend the current foreign exchange peg (around a mid-point of 155) up to a point, and tighten policy to achieve this. Should the naira trade consistently outside this band even after tightening, we believe the authorities will accommodate this, with the mid-point of dollar-naira exchange rates implicitly shifting to 160 in 2014.
From N155.74 per dollar at the beginning of the year, the naira closed the year at N155.7 per dollar in the official market, indicating four kobo appreciation. In the interbank market, the naira depreciated slightly by 120 kobo, from N158.84 per dollar at the beginning of the year, to N160.04 per dollar as at December 31st.
In the parallel market, the naira depreciated by 1100 kobo or 6.9 per cent from N159 per dollar at the beginning of the year to N170 per dollar at the close of the year.

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