The renewed demand for forex by fuel importers since Monday has continued to take its toll on the naira as the local currency maintained its downward slide against the United States dollar at the interbank market Tuesday.
THISDAY findings showed that the local currency dipped by 25 kobo at the interbank market to close at N158.15 to a dollar, as against the N157.90 to a dollar it was the previous day.
This trend, experts argued would continue till the end of the month, following the order from the Petroleum Products Pricing Regulatory Agency (PPPRA), that oil marketers should restart the importation of petroleum products for the second quarter (Q2).
The PPPRA said on Monday, that it had issued permit to the Nigerian National Petroleum Corporation (NNPC) and 41 other eligible marketers for the supply of the product.
But the Executive Secretary, Financial Market Dealers Association (FMDA), Mr. Wale Abe, said the development at the market was normal, even as he predicted that the local currency would not breach the Central Bank of Nigeria’s (CBN) exchange rate band. The official exchange rate band is +/-three per cent of N155.00 to a dollar.
“What we are experiencing is a normal situation and I think the naira is going to be relatively stable going forward,” Abe said in a telephone chat with THISDAY Tuesday.
Renaissance Capital (RenCap) had in a recent report, insisted that the country’s heavy import dependence was largely responsible for the huge forex outflow and the perennial weakness suffered by the naira.
“The country’s high import dependence explains why the exchange rate is often the bellwether for Nigeria’s economic health, and why there is a swift pass-through of exchange rate movements to inflation. About a third of Nigeria’s forex outflows are due to invisibles, which refers to services. These include international payments for services as well as movement of money for which there is no contra transaction, such as transfer payments.
“Nigeria’s large oil and gas industry explains the country’s substantial payments to service providers. Renaissance Capital is of the view that the local content bill will compel operators to source services from local providers and this will help ease the services’ payment burden on forex outflows,” RenCap had said.
According to the financial advisory firm, the country’s infrastructure deficit also explains the large imports of processed and final goods.
At the bi-weekly auction held Monday, the local currency had fallen to N156.06 to a dollar, compared with the N156.01 to a dollar it was last week Wednesday.
