Feb 10 (Lagos) - The Naira hit a fresh low of 313.50 against 1 US Dollar back to back after hitting a fresh low yesterday also. Chances are it will hit another fresh low tomorrow. It is probably hitting another fresh low right now as we write this article.
There is short supply of Dollar from the CBN and that is the reason for the daily fresh lows the currency is making against the Dollar.
So in reality the Naira is 199.25 at the inter-bank but the short supply means there are importers and speculators who are buying Dollars at whatever rate they get. We should expect the Naira to hit 400 very soon because this situation is a spiral that only CBN can control and it is not willing to do that right now.
Even the Emir of Kano and former CBN Governor has faulted the currently policy but the current CBN Governor is not willing to connect with the situation that businesses in the Country are facing.
The CBN took a strange decision in November 2015 to cut benchmark interest rates when most economist expected them to raise interest rates because that was the one and only measure that CBN had under its control to boost the value of Naira. Since that decision the Naira started falling and making fresh lows against the Dollar.
In economics interest rates are reduced to weaken a currency and raised to strengthen a currency. But Central Bank of Nigeria cut interest rates and spoke about need to strengthen the currency. It was shocking.
While the CBN can do all this in Nigeria what they cannot do is win the trust of international investors with these kinds of moves. The stock market sell off intensified since that November meeting. People have lost their investments and these are life altering losses all thanks to the Central Bank policies.
Interbank lending rate jumped to 2.0% on Tuesday from 1.0% on Monday after the central bank directed commercial lenders to fund their naira accounts to enable them take part in its forex intervention on Thursday. The central bank intervenes once a week at the inter-bank foreign exchange market to provide dollar liquidity for some eligible importers.