Naira bounces back after days of depreciation

The naira appreciated against the dollar on Friday after days of panic buying amid speculations that the Nigerian central bank may devalue the local currency.

The Nigerian currency had lost ground against the dollar earlier in the week, trading between N366 and N368 amidst the slowdown in global demand for oil caused by Covid-19.

Apart from the effect of Covid-19 on the global economy, a breakdown in talks between the Organisation of Petroleum Exporting Countries (OPEC) and its allies led to a freefall earlier in the week, with oil prices crashing to $33.

Nigeria relies heavily on oil to fund its budgetary obligation and fix infrastructure. Consequently, a crash in price and reduction in oil demand have affected the flow of dollars into the economy, resulting in illiquidity and buying pressure in the market.

On Thursday, the naira slipped to over N400 against the dollar, raising fears of further depreciation among Nigerians. Reports said it sold for about N430 in the parallel market.

But on Friday, the naira appreciated amid warning by the Nigerian apex bank that there was no plan to devalue the currency, trading at N375 against the dollar.

The CBN in its warning added that the recent calls for the devaluation of the Naira in response to the current global economic challenge was inappropriate, saying the time was not ripe for such an intervention.

- PT