Naira plummets as Nigeria floats currency for 1st time

The local currency also depreciated at the parallel market. Vanguard investigations reveal that lending to banks through the CBN’s standing Lending Facility (SLF) rose from N102.89 billion the previous week to N281 billion at the close of business on Friday. It was the first day in recent history the naira was traded openly with its value decided by market forces in line with the Central Bank’s new flexible policy.

CBN on Wednesday unveiled new guidelines in the management of forex which will be determined by the market and primary dealers. The nine-month contract fell as low as 337 per dollar while the six-month contract traded at 327.

“The rates adjustment may not cause the kind of inflationary pressure expected to happen, simply because market had already adjusted”.

The Acting Director of Communications, CBN, Mr Isaac Okorafor, said this to newsmen on Monday in Abuja.

The CBN has the responsibility to enhance the transparency, efficiency and effectiveness of the market. “With the development, the FX demand backlog has now been cleared and behind us for good”, he enthused.

Analysts had always been arguing that Nigeria would eventually have to capitulate and devalue its currency given that the government’s controversialagenda of currency and price controls created a bunch of economic stresses in Africa’s largest economy.

He also sais that they didn’t have any firm deals.

According to him, the move served in no small way to stimulate price discovery, with the determination of a marginal rate of $/₦280, through the Special SMIS process.

“The operating dynamics of the new framework as stipulated by the CBN is in accordance with the tenets of democratic capitalism of which the highlights are, market-driven systems, free participation within individual limitations and the “invisible hand”, it explained. So the activity in the market was created. It depends on how much the CBN is willing to supply to the market.

“Liquidity will likely return to the market because central bank will now sell its dollars at higher rates”. “Before then, we believe the macro picture will deteriorate”, Yvonne Mhango, an analyst at Renaissance Capital told Bloomberg.

“The important thing to watch now is that you can probably pick up assets at a slightly more realistic price because assets in Nigeria were highly inflated for a long time”, White says. They initially weakened to a record 310 to the dollar.

The President of Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadabe knows the reason of naira crash.

At the official auction yesterday, the apex bank sold $530m at the auction at N280 per dollar with 21 banks participating, traders said.