Naira tumbles on black market, hits 420 per dollar

The Nigerian naira plunged further to a new record low on Wednesday, down 1.76 percent against the dollar on the parallel market even as dollar supplies dry up.
The local currency fell to 460 to the dollar on the black market, down from 452 at the close of trading on Tuesday.

Though the naira closed at 305.50 to the dollar on the official interbank market against 305 a dollar the previous day, traders said dollar liquidity remains a major challenge in the market.
“Trading has continue to be thin on the interbank market as the dollar shortage persists while demand for the greenback remains strong,” one dealer said.
Dollar scarcity has gripped Nigeria’s currency market for several months now as the woes of Africa’s biggest economy persist.
Traders said that speculators and strong demand from parents buying dollars to pay school fees abroad are putting pressure on the Nigerian currency, though the president of the association of bureau de change operators, Aminu Gwadabe, said the rate is not a true reflection of the market.
“The market is being driven by speculators who are taking advantage of the poor implementation of central bank policy requiring banks to sell dollars to bureau de change operators to ease pressure in the market,” Gwadabe said, adding that most commercial lenders are reluctant to comply with the directive.
The central bank’s instruction accompanied its licensing of 11 new international money transfer operators last month in its efforts to boost dollar supply.
Nigeria, in June, ditched its 16-month-old peg of 197 naira to the dollar to lure back foreign investors who fled both the equities and bond markets in the wake of the plunge in crude prices.
Investors have welcomed the removal of currency controls but many are still steering clear until Africa’s biggest economy shows signs of a concrete recovery.
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.

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