Naira Drops As Food Inflation Rises

Fears of continued rise in inflation among foreign exchange dealers have further weakened the naira, market statistics have shown.

The local currency lost strength at the weekend, dropping to N485/$1 from N483/$1 at the parallel market.

The slide followed release of March inflation figure by the National Bureau of Statistics (NBS), which showed that Nigeria’s main price index jumped to 18.17 per cent in March from 17.33 per cent in February.

Food inflation spiked to 22.95 per cent in March from 21.79 per cent the previous month.

On the Investors & Exporters (I&E) Forex Window, the local currency responded to the inflation spike, weakening to as low as N437.41 to dollar, before quickly rebounding to a high of N394.00, and then pulling back to 410.

The current inflation figure exceeds six to nine per cent inflation target set by the Central Bank of Nigeria (CBN) and inflation is projected to cross 20 per cent by year-end.

Forex Trading Associate, AZA, global forex trading dealer, Oghenefejiro Eduviere, said exchange rate volatility will persist, with inflation concerns mitigated by the rise in crude oil prices this year with Brent Crude now selling at $65.3 per barrel.

He said that rising oil revenue and increased remittance inflows following the ‘Naira for Dollar’ incentive policy have helped boost foreign exchange reserves from $34.845 billion to $35.22 billion so far this month, according to the Central Bank of Nigeria.

Eduviere said: “Amidst the swings, we expect the overall trend will be a weakening on the parallel market towards N490 on inflation concerns.

Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said it was becoming clear that price inflation is not transient but is now more persistent.