By Chinwendu Obienyi
Nigeria’s currency hit an all-time low of N732 to the dollar at the parallel market as the market reacted negatively to the Central Bank of Nigeria (CBN)’s decision to raise the Monetary Policy Rate (MPR) and Cash Reserve Requirement (CRR) to 15.5 per cent and 32.5 per cent respectively.
This was even as the nation’s stock market experienced low sentiment as sell-offs in the shares of GTCO, Nestle and UBA resulted in a loss of N112 billion from market capitalization of the Nigerian Exchange Limited (NGX).
The Naira had exchanged for N733 to a dollar at the parallel market on Wednesday but moves by the apex bank to mop up excess liquidity in the system despite the CBN insisting that the MPC recent decisions will stop the Naira from further depreciation proved abortive.
Speaking to newsmen during the Post Monetary Policy Meeting (MPC)-Facts behind the CBN’s decisions which held via Zoom on Wednesday, the Director of Trade and Exchange Department, CBN, Dr. Ozoemena Nnaji, noted that the apex bank is doing its best to ramp up its policy on increasing supply of FX in the system.
“As long as we keep increasing supply, we would continue to start seeing the narrowing of the gap. You also know that we have elections coming up and elections would require some kind of exchanges, but we are ramping up our supply and that’s what the central bank is doing so that supply can go up and the differential in rate will continue to narrow”, Nnaji said.
However, the surging strength of the US dollar is having adverse effects on Nigeria’s local currency. According to parallel market operators, the fall was due to the dollar scarcity, which put pressure on the local currency.
“The CBN knowing fully well of what is happening to the economy decided to increase the interest rate. Were they expecting the dollar to reduce? Because what we are still seeing in the country is that there is scarcity of FX. So with them constantly talking of policies to increase FX supply, it remains absent as far as I am concerned”, Abdullahi Ismail, a trader said.
It would be recalled that since the CBN discontinued the sale of forex to Bureau de Change (BDC) operators, the Naira has been on a steady decline.