The Nigerian naira sank to a fresh record low on Friday, as the Central Bank of Nigeria (CBN) attempts boosting liquidity through sales of dollars.
The naira fell as low as 295.25 to the greenback, at the interbank market on Friday, as the apex bank attempted solving the liquidity problems challenging the foreign exchange market.
The local currency closed at 2.7 percent lower than its opening price — trading at 290 to a single dollar. The parallel market also slid from 363 to 365 against the dollar on Friday evening.
Lukman Otunuga, FXTM research analyst, says the pressure on the naira, and the economy, is changing sentiment towards Nigeria, adding that the economic momentum of the country could punish the Nigerian stock exchange.
“Nigeria’s first quarter government revenues for Q1 reached a paltry 55% of what was targeted following the ongoing militancy in the south, which has seen oil production decline to painful levels,” Otunuga said.
“The incessant declines in global oil prices already weighed heavily on the biggest economy in Africa and the diminishing government revenues could rekindle concerns over a technical recession in Q2.
“The pressure trickled onto the Naira, which depreciated over 4% against the Dollar on Friday after the Central Bank of Nigeria relinquished the Dollar at a weaker rate in an effort to boost market liquidity.
“Sentiment is slowing changing towards Nigeria and the ongoing concerns over a slowdown in economic momentum could trigger a wave of risk aversion which punishes the Nigerian Stock Exchange.”
The naira is currently retaining its spot as the worse performing currency on the African continent, losing over 30 percent of its value in the past six to seven months.