The Naira yesterday depreciated to N1,425 per dollar in the official market, the lowest in two months, following rising dollar demand triggered by ongoing war in the Middle East.
Data from the Central Bank of Nigeria, CBN, showed that the indicative exchange rate for the naira rose to N1,425 per dollar from N1,398 per dollar last weekend , reflecting N27 depreciation for the naira.
The nation’s currency has been on a appreciation trend in the official market since February 17, reaching N1,337 per dollar early last week before it began a gradual depreciation to N1,395 last weekend.
Cumulatively the local currency lost N88 to depreciation in the last three weeks.
Similarly, the Naira depreciated to N1,410 per dollar in the parallel market from N1,405 per dollar last week Friday.
Consequently, the margin between the parallel and official markets widened to N15 per dollar from N7 per dollar last weekend.
Investigation revealed that the depreciation of the Naira, which aggravated in the last week, has been driven by rising demand for dollars by Foreign Portfolio Investors, FPIs, exiting the country in response to increased risk perception triggered by the war between the U.S/Israel and Iran.
According to a banking industry source, the Central Bank of Nigeria, CBN last week had to inject $500 million to intervene in the forex market to moderate the impact of rising dollar demands from existing FPIs on the Naira.
Similarly, analysts at Financial Derivatives Company, said, “The decline in the Naira comes amid intensified demand for the U.S. dollar driven by escalating Middle East tensions.”
Also confirming this development, analysts at Cowry Asset Management, said: “The naira weakened across both exchange channels on Monday, reflecting heightened currency pressures across both the regulated official segment and the informal foreign exchange market.”
