Amid perceived move by the Central Bank of Nigeria (CBN) to douse concerns over the weakening of naira against the dollar, the financial markets particularly the foreign exchange (forex) segment seems not at ease.

Till date, there seems to be a slight difference in what causes naira fall going by the apex bank’s stance and dealers’ position.
CBN believes that the pressure on the local currency is mainly due to some speculative demand arising from fears that Nigeria’s external reserves could drop, particularly with the dwindling oil prices which may reduce the apex bank’s capability to meet demand in the market.

Financial Market Dealers are of the view that the declining price of oil in the global market, growing inflationary tendencies, unattractive rate of returns in the debt markets and increased demand for imports will continue to put further pressure on the naira.
“Inflation rate may further look north due to the proposed increase in electricity tariff as well general increase in the cost of inputs,” said Financial Market Dealers Association (FMDA).

Naira that showed no sign of retreat in the last four months shed some weights as it depreciated against the United State dollar across all the market segments except CBN in the month of May. For instance in May, naira depreciated on average by 115kobo at Interbank, 105kobo at Bureau De Change (BDC) and 48kobo at the parallel market relative to April’s average rate.

The naira in the last few days has steadily declined against the dollar, both at the interbank and parallel segment of the forex market, raising concerns that it could spur illiquidity in the nation’s foreign exchange market.

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