The naira crashed further against the dollar for the third consecutive time this week at the interbank market as it fell to a new low of N174.15 at the close of trading.
The naira, which closed at N169 on Friday, had crashed to N173.20 and N173.35 on Monday and Tuesday, respectively.
The nation’s currency has been on a free fall in the past weeks and interventions at the interbank forex market by the Central Bank of Nigeria have failed to lift up the local currency.
The naira was close to N180 to the dollar at the parallel market on Tuesday. At the interbank market, the naira traded at N176 on Tuesday before rising back to N173.35 after the CBN had intervened and sold dollars to lenders.
Financial and economic analysts have linked the development to the falling oil prices in the global markets, the speculative buying of the dollars and massive demand from investors, who fear the naira may lose value in coming months.
On Wednesday, the CBN did not intervene at the interbank market apparently because of its sale of dollars at its official Retail Dutch Auction System forex market.
Should the central bank fail to intervene at the interbank market on Thursday, forex dealers said the naira might crash further to about N175 or N176 to a dollar.
The once every two-month Monetary Policy Committee Meeting of the CBN is due next week and analysts believe the central bank may likely announce a new policy to prop the naira.
An analyst at Ecobank, Mr. Kunle Ezun, said, “The CBN is likely going to announce a new policy to support the naira next week. The bank may devalue slightly as it has tactically done at the interbank market; or it may come up with other plans to support the naira.
“I think the MPC meeting is likely going to be the game changer for the naira, and the market may even stabilise by Friday in anticipation of what the MPC meeting will announce at its meeting on Tuesday; after the meeting, the market may then react again.”
The CBN has been intervening at the interbank market in the past weeks to prop up the naira but persistent demand for the greenback has kept the local currency on the downward trend.
Analysts said on Wednesday that the demand for the dollar had been growing while supply was constant or dropping.
“When there is an uncertain outlook for the naira, it will fuel speculative and panic buying. The capital and bond market are not good now; investors are divesting and they will want to repatriate their funds in dollars,” a financial market analyst, who pleaded anonymity, said.
He added, “If the CBN wants to support the naira, it should do so by bringing more dollars to the market consistently so that those who want to speculate will be weary of doing so.
According to the Head of Research, Sterling Capital, Mr. Sewa Wusu, the entire naira crisis can be linked to the falling oil prices in the global market.
He said the naira problem could be traced to the activities of investors who were reacting to the potential danger in the economy as a result of the falling oil prices.
He said, “What is happening to the naira is at the global level. The major problem is because our economy depends on oil as its main source of revenue. Among other things, the demand is increasing because investors are pulling out. This is why the CBN is under pressure, trying to manage the naira.
“The CBN has done a tactical devaluation at the interbank level. Next year, it will officially devalue.”
Analysts at Afrinvest Research predict “the depreciation of the naira at the interbank forex market is expected to persist.”
“This is obviously traceable to the demand shift in dollars from the CBN forex market to the interbank forex market, due to the exclusion of some items. With the yuletide season approaching, the pressure is likely to continue at both the interbank and the BDC forex market as we retain our 2014 forecast of N175.00/$1.00 at the BDC market.”
Ezun, however, said at the end of the year, the naira could stand at N169 to the dollar.