Naira hits six-month low at parallel market

Naira fell to a six-month low at the parallel market Tuesday after the Central Bank of Nigeria adopted the relatively flexible Nafex exchange rate, effectively devaluing the currency.

The currency closed at N487 at the black market, a 0.21 per cent fall from N486 it traded on Monday, data posted on abokiFX.com, a website that collates parallel market rates in Lagos showed that the naira. The last time the local unit touched N487 at the parallel market was on November 25, 2020.

The currency closed at N411.56 to the dollar at the Investors and Exporters market, also known as Nafex, a 0.08 per cent depreciation from Monday. Naira touched an intraday high of N363.00 and a low of N420.25, according to data posted on the FMDQ Security Exchange where forex is officially traded.

The CBN posted the I&E rate on Monday on its website two weeks after it deleted the previous official fixed rate of 379 naira, effectively devaluing the currency by 7.6 per cent.

In March, the CBN had denied devaluing the naira after the Minister of Finance, Zainab Ahmed, said the government had adopted the Nafex rate used by investors and exporters.

At the time, CBN governor Godwin Emefiele reiterated that the apex bank still maintained the “official rate” of N379, while the Nafex rate of N410 was adopted for certain government businesses.

He said the CBN was operating a “managed float” policy, which allows it to watch market dynamics and intervene in the market whenever necessary.

On Tuesday, while announcing the benchmark lending rate, Mr Emefiele reaffirmed the central bank would monitor the market and intervene if the currency is seriously distressed.

The latest move indicates an effort by the Nigerian government to unify the exchange rate for the naira, a key requirement put forward by the World Bank for Nigeria to access a $1.5 billion credit.

The Nafex rate has oscillated between 408 and 412 for months, a significant difference from the 379 the CBN listed as the exchange rate on its website.