Naira Slides Amid EFCC Arrests To ‘Sanitise’ Forex Market

New reports have shown that the naira has weakened again.

The naira, yesterday weakened against the dollar, sliding to N790/$ at the parallel market due to dollar scarcity that has pushed demand higher than supply.

At the Investors and Exporters Forex (I&E) Window- now the official market rate- the naira is quoted at N442.85/$,  data on the CBN website showed.

The local currency has been relatively stable at this window used for official transactions, but bulk of retail transactions happen at the parallel market.

The fall of the naira at the parallel market happened a time inflation accelerated to a 17-year high of 21.09 per cent for October, led by rising fuel costs, an forex scarcity and disruptions to the global food supply chain.

Forex Trader at AZA Finance, Ikenga Kalu, said severe flooding across many parts of Nigeria, resulting in significant loss of farmland, has squeezed domestic food supplies and pushed prices higher.

He said: “The Economic and Financial Crimes Commission -EFCC- said it has arrested some bureau de change operators and currency speculators in an attempt to ‘sanitise’ the FX market, which it says helped the Naira recover from its record low 865 hit in early November. We expect to see further weakness in the days ahead as businesses take advantage of the relative dip to meet dollar needs.”

Global Chief Economist at Renaissance Capital (RenCap), Charles Robertson, said Nigeria is in a difficult position and needs to increase its dollar earnings and other revenue to support the naira.

He said Nigeria should hike taxes, raise more revenue as the country’s current position is so bad, that it has never been witnessed in the last three decades.

Robertson, who is also RenCap’s Head Macro-strategy Unit, added: “Things are not looking pretty good for Nigeria and other emerging markets. Oil production in Nigeria has fallen so badly in the last few years and oil prices is also about falling more. We are going to see disinflationary policies coming because we are approaching recession,” he said.

Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said the naira is falling on the back of heightened forex demand compared to limited forex supply.

He said: “Nigerian consumers, businesses and individuals alike are facing challenges and headwinds and are reeling in an atmosphere of hopelessness. This is because of a myriad of factors.”

“Notably, the precipitous fall of the naira in the forex market, the power supply shortage and now the almost unaffordable price of diesel. In spite of the hike in interest rates, we are witnessing what some analysts fear may become a bout of runaway inflation.  Inflation is not just domestic but global.”

Managing Director, Cowry Asset Management Limited, Johnson Chukwu, said that to save the naira, Nigeria needs to build an economy that is net exporter of valuable goods and services to earn more dollars.

He said priority should be given to manufacturing and exports to enhance speedy recovery of the local currency.