Nigeria’s naira falls to record low vs U.S. dollar

Nigeria’s naira fell to as low as 1,421 against the U.S. dollar on the official market on Friday, according to Reuters citing FMDQ Exchange data on Monday.

The currency also overshot the unofficial parallel market rate due to its wide swings.

The parallel market quotes about 1,400 naira. Later, the official market saw the currency close at 891.90 naira.

The most recent decline happened last Wednesday after central bank governor Olayemi Cardoso stated the bank was attempting to increase foreign exchange market liquidity.

The naira has surpassed the record low level it reached on the parallel market, according to Kyle Chapman, FX markets analyst at London-based Ballinger & Co. This could impede the inflow of capital required to stabilise the exchange rate.

“The downwards spiral is becoming self-perpetuating at this point. The further it falls, the less investors want to enter Nigeria, and the deeper the risk premium embedded into the naira rate,” Chapman said.

The central bank has not yet settled outstanding amounts owed in forward deals, which has caused the naira’s official exchange rate to veer closer to the level of the parallel market and exacerbate the West African nation’s shortage of foreign currency.