The naira on Wednesday depreciated further to N385 per dollar in the parallel market as demand for foreign exchange intensified in the market.
This implies the naira has depreciated by N60 against the dollar this week in the parallel market, when compared with the closing exchange rate of N325 per dollar Friday last week.
The currency however remained stable at the official interbank foreign exchange market as the interbank rate closed N199.34. Thus the gap between the interbank and parallel market rates widened to N185.66 per dollar from N127.53 Friday last week.
Investigation also reveals that the naira depreciated against the British Pounds to N505 per pounds in the parallel market implying N65 depreciation when compared with the closing rate of N440 Friday last week.
Investigations further reveal that the sharp depreciation of the naira in the parallel market this week is driven by increasing demand by importers sourcing dollars to pay for imports from China.
According to a BDC operator who spoke on condition of anonymity, “You know China had been on its one month annual holidays. But they resumed work on Monday, and people have to complete payment for goods ordered before the holidays.
“They had made 30 per cent down payment to order the goods and they now have to pay the 70 percent balance otherwise they will lose the 30 percent. That is why they are desperate and ready to buy dollars at any rate. Meanwhile supply is scarce and those who have dollars are not willing to sell because they might also need the currency soon”.
The naira has been on steady decline since Tuesday January 12th 2016, when the Central Bank of Nigeria (CBN) stopped weekly dollar sale to BDCs. Prior to this action, the naira traded at N265 per dollar in the parallel market. Consequently the naira has depreciated by N80 in the parallel market since the CBN took the action.
