The naira hit an all-time low of 196.30 against the dollar at the
interbank segment of the foreign exchange market on Monday following the
announcement of the postponement of the general elections by six weeks.
The Independent National Electoral Commission had on Saturday
announced the postponement of the elections from February 14 and 28 to
March 28 and April 11
.
The postponement of the elections has cast a shadow on the naira’s
outlook, pushing the forex markets into a panic mood, according to
analysts.
Foreign exchange dealers and financial analysts told our
correspondent on Monday that the poll shift had heightened pressure on
the naira as investors became worried over whether the elections would
hold or not.
On Friday, the naira closed at 193.90 against the dollar despite an
intervention by the Central Bank of Nigeria. The naira had closed at
192.70 to the greenback on Thursday.
“The postponement of the elections was a major blow to the naira.
The naira has fallen by this margin because investors are worried over
whether the elections would hold or not. In a way, it has heightened the
security risk on the country,” said a forex dealer who chose to speak under the condition of anonymity.
According to analysts, if the trend continues, the naira may cross 200 against the dollar at the interbank market.
This, they said, would push the value at the parallel market to about 230, up from the current 207.
Some industry analysts and investment advisory firms, including
Afrinvest West Africa Limited and Financial Derivatives Limited, had
predicted that the naira might hit 200 at the interbank market soon.
The Head, Investment and Research, Afrinvest West Africa Limited, a business advisory and research firm, Mr. Ayodeji Ebo, said,
“The delay in the polls will increase election spending and outflows of
funds from foreign portfolio investors. This will continue to put
pressure on the naira. A lot of people are also now betting on the naira
because of the uncertainty in the country. The issue of falling oil
price is also there.
“If the naira should cross 200 against the dollar at the
interbank market, the CBN may convene an emergency Monetary Policy
Committee meeting to address the issue. If the pressure continues, the
naira may be devalued before the elections.”
According to Ebo, the CBN needs to also build a policy around the
informal activities that make use of the naira by bringing some of the
imported items back to its Retail Dutch Auction
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