In what will come across as a really disheartening development, the naira has fallen even more against the dollar.
The naira dropped to 382 against the United States dollar at the parallel market on Monday, down from the 380 it closed on Friday.
The local currency had hovered between 375 and 380 against the greenback last week.
The naira has been under a persistent pressure as dollar scarcity continues to weigh on the local currency at both the parallel and interbank forex markets.
Economic and financial experts said inadequate forex liquidity at the interbank market was taking a toll on the parallel market.
Analysts had predicted that the naira would weaken further against the dollar this week owing to limited dollar supply as foreign portfolio investors continued to stay on the sidelines until the Nigerian economy showed signs of recovering from the impact of currency controls.
The naira had hit an all-time low of 334.50 per dollar on Wednesday, a day after the Central Bank of Nigeria hiked interest rates to try to lure foreign investors back into local assets.
On Monday, the naira closed at 316.37 against the dollar at the interbank market. On Friday, it closed at 321.16 to the dollar, compared to 292.40 the previous Friday.
According to financial analysts and experts, the naira may weaken further, especially at the interbank market, if the CBN fails to intervene at the market this week.
The CBN had asked for quotes of $5m each from currency traders on Wednesday as it sold the US currency to boost dollar liquidity and support the naira, traders said on Monday.
The naira opened at 315 to the dollar and weakened to 324 before the central bank intervened to help the currency close at 316.37. A total of $27.05m was traded on Monday, Thomson Reuters data showed.
“The market still lacks enough liquidity, we need to do more to boost liquidity. The current rate is a measure of the amount of dollar liquidity at the interbank market,” a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said.
He believes that the market will improve in the coming months and boost the naira value.
The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said, “We are in a very challenging situation as a country and the CBN needs to do something urgently to stabilise the exchange rate at the interbank market.
“If the CBN fails to intervene, the naira may fall further against the dollar at the interbank market. If it does, the naira may appreciate to say about 310 to the dollar. But the point is that the market needs sustained intervention until there is a calm that will assure the foreign investors that things are now normal.”
Chukwu noted that the CBN might need to access close to $10bn facility from the World Bank to stabilise the forex market.
A research analyst at FXTM, Mr. Lukman Otunuga, noted that the elevated concerns over a potential technical recession in Nigeria had forced the CBN to relinquish its naira peg.
“With the parallel and official markets potentially closing the gap as the naira floats, liquidity could increase as investors send their dollars to the official exchange. As of now, the naira could depreciate further as a combination of rising US Fed rate hike expectations and ongoing fears over the domestic economy encourage investors to install another round of selling,” he said.