Market News

by  Anthony Osae-Brown, Bloomberg News

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(Bloomberg) -- The Nigerian naira declined to a record low for the second time in about two weeks as the currency continues its wide swings in a bid to find a market level. 

The local currency unit declined 14% on the official market to close at 996.75 naira to the dollar, the lowest it has traded on record, according to data compiled by Bloomberg. It was the steepest single-day loss since Oct. 30, when it weakened 25% to 993.82 naira per dollar before rallying 18% the next day.

“The volatility in the naira is natural as the market tries to find its level,” Charlie Robertson, head of macro strategy at FIM Partners, said by email.

The naira’s parallel-market rate, which has rebounded strongly this week, traded at 1,110 to the dollar on Friday, according to Abubakar Mohammed, chief executive officer of Forward Marketing Bureau de Change Ltd., which compiles data on the informal market in Lagos. 

That narrows the gap between both rates to only 10%, the closest they’ve been since mid-June when the central bank allowed the naira to trade more freely against the US currency.

Read More: Nigeria Plans New FX Rules, Targeting 750 Naira Exchange Rate

“There has been more flexibility in USD-NGN price determination in recent weeks, but the traded range remains very wide,” said Samir Gadio, head of Africa strategy at Standard Chartered Bank. “Overall, it seems local market adjustment is heading in the right direction.” Gadio said.

While the validity of the official exchange rate as a benchmark has been limited in recent times, it’s still a powerful signal on the currency views of the key monetary policy actors, Samuel Sule, Renaissance Capital Africa’s chief executive officer said by email. “A market driven transparent rate is being worked on and current volatility signals work that needs to be done to achieve this,” he said. 

--With assistance from Colleen Goko and Emele Onu.