The naira on Wednesday, crashed to a record low of N1,370 /$ at the parallel market, inching closer to N1,400/$ rate.
The depreciation of the local currency was mainly as a result of shrinking dollar supply from the Central Bank of Nigeria (CBN), authorised dealers (mainly commercial banks) and autonomous market sources.
The local currency traded at N1,365/$ at the parallel market on Tuesday but was relatively stable at the official market where it exchanged at N882/$, data from the FMDQ Exchange showed.
A BDC operator in central Lagos, Tamiu Abiodun, said the naira will continue to fall, unless there is urgent policy change that increases dollar liquidity.
“It is a matter of demand and supply. The demand for dollar keeps rising everyday, without commiserate supply from authorized dealers or the Central Bank of Nigeria,” he said.
The naira fall continued despite uptick in crude oil prices. Brent is trading at $79bp after the Energy Information Administration (EIA) forecasts tighter markets on slimmer OPEC+ output.
President, Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, advised the Federal Government to enhance financial intelligence by tracking people with proceeds of corruption to sanitize the market.
He said many of the people with proceeds from corruption are the ones putting pressure on the forex market through their manipulative actions.
“The naira is depreciating not by forces of demand and supply, but by the collective action and impact of the people with illicit funds,” he said.
Former Executive Director, Keystone Bank Limited, Richard Obire said the weakness of the naira over time has been caused by two broad issues linked to the quality of leadership and governance.
He said Nigeria’s heavy and skewed outward-oriented consumption of goods and services as seen in decades of long substantial bills for food and energy imports remains a hindrance to naira stability.
Also, the massive corruption-driven capital outflows which in turn severely damages Nigeria’s capacity to produce at scale that will enable the country to fully engage its large population to create widespread prosperity works against the naira.
On ways to strengthen the naira, he advised that in the short-term, there is need to find non-market damaging ways to increase the supply of hard currencies and reducing the demand for same.
He said that insecurity hampering food production needs to be tackled with a sense of urgency and effectiveness.
“Priority should be given through deploying pragmatic incentive programs to drive up the volume of food products for domestic consumption and industrial use to reduce our food import bill. All government consumption expenditures requiring the use of hard currencies should be suspended indefinitely, starting now,” he advised.