Naira Hits New Low At N334/$ As Forex Demand Soars

The value of the naira slumped to a new low on Wednesday, July 27, exchanging at N334 to the dollar as demand for foreign currency soared.

This fall is coming a day after the Central Bank of Nigeria, CBN, hiked benchmark interest rates to attract foreign portfolio investments,

The Monetary Policy Committee of the apex had made a decision to increase monetary policy rate by 200 basis points from 12 per cent to 14 per cent. The naira weakened to N334.50 at the interbank market yesterday from N310.50 which it closed on Tuesday.

Although the value of the naira had plunged by 7.7 per cent compared to Tuesday’s value at the interbank market, it depreciated slightly at the parallel market where it fell to N378 yesterday from N377 to the dollar which it sold on Tuesday.

According to traders, investors were pushing the currency lower to test the limit of how far it can fall, given a spread of almost 12 per cent between the official and black market naira rates.

Analysts believe the MPC decision to hike rates although the country is heading into a recession so as to attract foreign portfolio investments that will drive liquidity in the market.

The anticipation of the CBN according to analysts is that higher rates will drive an inflow of foreign currency from investors such will in turn create a stronger naira and drive down the imported inflation in the long run.

Traders however say inflow of FPI may not come as soon as expected as there are other factors that the country needs to fix to stir the interest of the investors. One trader told Leadership that investors are still not sure that exiting the economy will be as easy considering the reserves and the low forex income of the country.