The naira, which has come under pressure in recent days, fell to 361 against the United States dollar at the parallel market on Tuesday, as traders and investors continued to await details of the proposed flexible foreign exchange policy from the Central Bank of Nigeria.
The value of the local currency dipped further as customers, trying to hedge against a possible currency depreciation when the CBN clarifies its new forex policy, snapped up every available dollar from retail outlets, according to Reuters.
The naira stood at 357 against the greenback on Monday at the unofficial market, down from 355 on Friday, foreign exchange traders said.
The President, Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadabe, said, “Dollar demand has increased due to uncertainty around the central bank’s forex policy.
“Most firms and individuals that normally sell dollars to retail currency dealers are holding on to the cash.”
The CBN had recently said it would abandon its naira peg to the dollar and introduce a flexible currency regime. It has not said how this will work, a situation that has unsettled investors who are worried about getting caught in the middle of a devaluation.
Analysts and traders had on Monday linked the drop in the value of the naira to the mounting fears among traders and investors over the flexible exchange rate policy proposed by the CBN.
They said the continued delay by the central bank in releasing the blueprint for the planned flexible exchange rate policy was fuelling hoarding and speculation in the forex market.
The CBN’s Monetary Policy Committee had two weeks ago announced the plan to adopt a flexible exchange rate. The Governor, CBN, Mr. Godwin Emefiele, said the blueprint for the proposed policy would be released soon.
The delay has, however, caused the stock market to record huge losses after recording landmark gains following the announcement of the plan to adopt the policy.
The central bank banned dollar sales to retail Bureaux De Change in January and reduced supply at its official interbank forex market in an effort to conserve reserves, now at their lowest level.