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Naira set to weaken more as clampdown continues

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Nigeria’s naira is set to witness another round of decline against the dollar in the days ahead as an increase in dollar flows from Nigerians living abroad coming home for holidays fell short of expectations, traders said.

Specifically, they said the naira might fall to 500/dollar this week. 

The local currency was quoted at 490 to the dollar on Thursday from 495 against the dollar last week on the parallel market.

In the official interbank window, the naira was quoted at 310.25 to the dollar on Thursday, but it was expected to close at around 305.5, the same level it has traded at since August.

“We see the naira depreciating against the dollar by the time more businesses resume operations next week after the festive season as dollar liquidity remains thin in the market,” one currency dealer said.

The naira fell against the United States dollar from 485 to 490 at the parallel market on Wednesday, reversing part of the gain it had recorded against the greenback last week. 

The local currency, which had fallen to 495/dollar last Thursday, recorded some gains and closed at 485/dollar on Friday.

Since Friday when the Christmas holiday was announced, the naira closed at 485/dollar at the parallel market.

The naira plunged to 470/dollar, down from 455/dollar on the back of dollar shortage at the official and parallel forex markets some weeks ago.

The naira has, however, consistently closed around 305.5 a dollar level since August via the official window.

A Director at Union Capital Markets, Mr. Egie Akpata, said it was really difficult to predict the direction of the naira currently because part of the currency market had shut down for the year.

You can’t really predict the market now because part of the market has shut down for the year. Things will really take shape next week. Currently, it could swing anywhere.”

Currency dealers said the consistent clampdown on black market operators by security agents had compounded the naira problem, putting more pressure on available dollars.

 

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