The naira extended its weakening trend yesterday, dropping to N1,450 per dollar on the parallel market from N1,300/$1 on Wednesday, forex traders said. The local currency also depreciated further on the official market on Thursday, closing at N1309.88/$1 compared to N1,308.52 per dollar on Wednesday, data from FMDQ shows.

Analysts attribute the naira’s weakness in the last few days to low domestic dollar liquidity. In a report on Wednesday, Bloomberg said that supply of dollars is proving to be insufficient to support the Central Bank of Nigeria’s (CBN) resolve to boost confidence in the naira, adding that volumes in the foreign exchange market dropped to a two-month low of $86 million on Friday before recovering to $133 million on Tuesday.

It quoted head of Africa strategy at Standard Chartered Bank, Samir Gadio, as having said: “The naira has been supported by onshore dollar selling as long positions were unwound, but the rally was probably overextended.”

According to him, a dislocation started to emerge as domestic market participants sold dollars at increasingly lower spot levels which was not sustainable and led to a correction.

The naira has lost more than 60 per cent of its value against the dollar since June after two devaluations aimed at allowing the currency to float more freely to attract more foreign capital. The CBN has also introduced a raft of measures to prod lenders to supply more dollars to the local market.

The apex bank, on Tuesday, offered dollars to operators of bureau de change at N1,021 per dollar, 21 per cent below the official rate tracked by FMDQ, in a bid to improve liquidity in the parallel market.

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