The naira dropped further to N470 per dollar on the parallel market yesterday from N465/$1 on Tuesday as scarcity of foreign exchange, occasioned by the slump in oil prices continues to negatively impact the local currency. It, however, closed at N386.50 per dollar from N387.75/$1 earlier in the day at the Investors and Exporters’ (I&E) forex window Analysts said the naira’ weakening on the parallel market was due to traders bidding up rates in anticipation of demand shifting to the unofficial market after the Central Bank of Nigeria’s (CBN) recent rate unification moves. On July 7, the apex bank adjusted the exchange rate at the official window, according to data on FMDQ website, by 5.54 percent to N381 per dollar from N361/$, sparking speculations that it had officially devalued the local currency.
A few days earlier, the CBN had adjusted the naira’s rate from N360/$1 to N380/$1 at the Secondary Market Intervention Sales (SMIS). The SMIS is the market where importers bid for forex using Letters of Credit and Form M. It was established by CBN for importers to ease the pressure faced by businesses in the foreign exchange market through sales of foreign currency to authorized dealers (wholesale) or to end users through Authorized dealers. The CBN has been under pressure both from the World Bank and International Monetary Fund (IMF) to unify the country’s multiple exchange rates as part of measures to improve the transparency of its currency-management system. Investors have said the absence of a single rate creates confusion and deters foreign investment.