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Naira hits lowest level in four years after CBN modifies rate

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The Central Bank of Nigeria (CBN) has weakened the local currency for the third time in 2020, while striving to curb dollar demand in the face of feeble inflows of foreign currencies into the Nigerian economy.

It modified the rate at which bureaux de change could sell the naira by 1.56% to 392 per dollar up from 386, CBN said in a circular issued to dealers on Monday, seen by Bloomberg.

The regulator declared traders would buy the greenback at N390 from N384, going further to say international money transfers would be conducted at banks at an exchange rate of N388 a dollar, relative to the previous rate of N382.

Naira had been devalued in March and July this year and the latest weakening of the currency came at a time Africa’s top crude exporter was battling weaker than budgeted oil prices together with the turbulence in its economy in the wake of the pandemic outbreak.

A steep fall in the foreign exchange inflows of a country that depends on crude oil for over 90% of its forex earnings means a greater pressure on its international reserves, therefore straining the naira.

Read also: Naira depreciates against dollar at I&E window amid fall in forex supply

Mosope Arubayi, chief economist at Lagos-based Vetiva Capital Management Limited, said “oil prices didn’t recover strongly as many had anticipated with the reopening of the economies.”

The depreciation “basically signifies some pressure on CBN right now,” she added.

The U.S. dollar is seeing limited liquidity at the official currency market called the Investors & Exporters window, where the regulator operates a reasonably rigid rate and the development has shot dollar needs up at the black market, where rate is flexibly determined.

Naira sold at 500 per dollar on Monday, its weakest level since 22nd February 2017, according to figures from abokiFX, a website that collates parallel market rates.

The black market rate is 22% lower than the current official rate, standing at 388.54 a dollar.

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