NNPC’s termination of Naira for crude deal with Dangote heightens FX demand, as Naira weakens 

Naira’s slide at both the official and parallel market continued yesterday following the end of Naira for crude deal with Dangote Refinery.

 

The local currency exchanged for 1,540.57 against the dollar at the official market on Monday. This is after the Naira had stabilized at N1,500 for a while until the NNPC failed to renew the Naira for a crude deal with Dangote. As a result, the demand for dollars increased, causing the naira to lose value against foreign currencies.

 

 

 

 

The Central Bank of Nigeria (CBN) had sustained its intervention in the foreign exchange market with a view to keep the local currency stable at the current N1,500 range.

 

 

The local currency fell at the official window due to what sources called insufficient dollar supply to meet the increasing demand, per Daily Trust report.

 

 

The exchange rate depreciated by N18.95 last week, closing the week at N1,536.89 at the official market.

 

 

However, the market opened the week yesterday with the dollar exchanging for N1,540.57 fuelled largely by rising demand pressure in the market.

 

The CBN sold $92.10 million as the week ran down, bringing the total FX sales to $230.90 million amidst external reserves fluctuation.

 

At the unconventional black market in Lagos, the dollar was bought at N1,560 yesterday and sold for N1,570.

 

The unification of the exchange rate market had closed the gap between the official and parallel markets.

 

 

But experts warned that the rising demand coupled with low dollar supply in the market poses risk to the stability of the naira.

 

Already, importation of petroleum products has become the order of the day with marketers now scrambling for the little amount of dollars in the market to meet their obligations.

 

Daily Trust quoted an economist, Dr. Marcel Okeke who said the recent announcement by Dangote Refinery is an ill-wind for the foreign exchange market.

 

 

He said by the time the marketers begin to scramble for foreign exchange to buy petroleum products from the refinery or from outside the country, the forex demand would increase thereby leading to an increase in the exchange rates.