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17 Feb 2016

Naira continues massive freefall against US Dollar (updated)

The Nigerian naira has continued its unprecedented freefall in value against the US Dollar. Our national currency is now valued at N352 to USD1 on the parallel market, falling in value from N347 to the dollar yesterday. While some market operators did sell at N352 – USD1 yesterday, the market rate appears to have been in flux between N347 – N352. Our currency was trading within a range of 352 and 360 a dollar on the parallel market on Wednesday, February 17, down to a new record low from a range 347 to 352 on Tuesday due to persistent dollar shortages amid control by the central bank. As of today, the naira fell almost two percent, it was hit by a major decline in cement companies’ shares, including Dangote Cement, which accounts for the third of local bourse capitalisation. The local bourse index dropped 1.81 percent to 24,070 points at 1221 GMT as investors took profits from previous gains on the stocks. An unnamed stock broker said: “Due to the rapid decline of the naira’s value, some offshore investors are booking profit and selling down their holdings.” Dangote cement shares fell 4.11 percent, Ashaka cement was down 4 percent while Cement Company of Northern Nigeria dropped 8.89 percent to drag the index down. The stock index, which has the second-biggest weighting after Kuwait on the MSCI frontier market index, has declined by around 14.41 percent since January According to Reuters, concerns over the naira’s depreciation and the unwillingness to adjust its exchange rate is a great factor contributing to the decline.
Foreign exchange dealers have said that the increasing pressure on the Naira is caused by high demand for the dollar by importers and speculators. The Central Bank of Nigeria remains doggedly determined to maintain its policy of pegging the Naira to N197 – USD1. Market analysts and CEO of Economic Associates Dr. Ayo Teriba, said the Nigerian economy should not have been allowed to deteriorate to its current point.
“This is 2016 and not 1986, 1992 or 1995; the conditions are not the same. The global environment has liquidity now that Nigeria can attract,” he said. “The situation is not like 1986 when the global environment was tight.” Despite the economic turmoil caused by the Naira’s slump in value, President Muhammadu Buhari has reiterated that he will not consider devaluing the national currency. The president believes that devaluing the Naira will only cause disaster for Nigeria’s poorest people and will in fact increase inflation. READ ALSO: Experts debate merit, demerit of Naira devaluation If you want to keep track of the issues and events that will effect the economy and the strength of the Naira, you can read our updates on the price of oil and the Naira – US Dollar exchange rate on the parallel market.

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Item Reviewed: Naira continues massive freefall against US Dollar (updated) Rating: 5 Reviewed By: Link Naija