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Naira falls to record lows in todays trading

By on October 6, 2011

The Nigerian Naira has continued its free fall against major currency pairs, depreciating against the Dollar, Euro, and Sterling. The Naira has fallen to its lowest on record in the inter-bank market even as Central Bank Governor Sanusi said on CNBC Africa, yesterday, that defending the Naira is not a do or die affair.

The Naira lost as much as 1.8% in trading today, falling to as low as N 164.42 against the greenback or US Dollar.

Supply continues to lag demand, which is causing downward pressure on the Naira and the National Foreign Reserves which currently stand at approximately $31 Billion.

“Sanusi’s latest views somewhat represent a break with previous comments surrounding the naira and point to the increased possibility that the central bank is effectively starting to consider a controlled currency devaluation,” Matthew Pearson, the head of African equity products at Standard Bank Plc, wrote in an e-mailed research note today.

The central bank has been using foreign-currency reserves to keep the naira within a 3 percentage-point band above or below 150 per dollar at its twice-weekly auctions. It broke that band the first time on Sept. 26.

To prevent the dollar-naira rate becoming “a one-way and disorderly bet higher, the central bank will have to further tighten liquidity conditions and still provide ample foreign- currency supply at the auctions,” he said.

The central bank sold $400 million at yesterday’s auction, compared with $685.4 million demanded by lenders.