The nation’s currency, Naira slipped 2.5 per cent to a new closing low of 310 per dollar on Monday, failing to lure in local investors or foreign players as trade dried up a day before an expected interest rate hike from the central bank.
Reuters report monitored by Business247 News Online, the currency had opened at a record low of 302.10 on Monday and traded a total of just $8.64 million by the close, far less than $100.54 million on Friday, when the Central Bank of Nigeria spurred the market by selling some of its dollars.
Last Thursday, the Naira fell through 300, a month after the CBN lifted its controls on the currency. On Friday it hit an all-time intraday low of 331 before recovering ground by the close.
The CBn had hoped that scrapping the dollar peg and letting the currency fall by a third would help attract investment and erase the need for a black market, where the naira trades another 17 percent weaker against the dollar.
But some foreign players have stayed out of the market, traders say, adding that they will be closely watching the outcome of the central bank’s policy meeting on Tuesday. Analysts expect the bank to raise interest rates, which should make the currency more attractive to foreign investors.
Before the CBN pegged the naira to a fixed rate against the dollar, the interbank market had traded volumes of over $100 million a day every day.
The country ditched its 16-month-old peg of 197 naira to the dollar last month to allow the currency to trade freely and lure back foreign investors who fled both the equities and bond markets in the wake of the plunge in crude prices.
The CBN has also been mopping up naira liquidity to shore up debt yields. But the lack of dollar liquidity has curbed interbank activity, leaving the central bank as the main supplier of dollars, traders told Reuters.
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