Naira hits N470 to USD at parallel market

The Nigerian naira took a sharp dive at the parallel market, hitting a new low of 470 naira to the U.S. dollar on Wednesday. This downward spiral in the local currency has raised concerns about the economy's stability and sparked discussions on the necessary interventions to address the situation. Kingsley Okereke, a treasury and fixed income dealer at Diamond Bank, shed light on the factors at play and possible solutions during a recent interview on CNBC Africa. Okereke delved into the current state of the foreign exchange market, highlighting the challenges faced by the naira. He emphasized the impact of liquidity issues and supply shocks on the rate, leading to the staggering figure of 470 naira to the dollar at the parallel market. While the interbank rate remains relatively stable at 210 to 212 levels, interventions by the Central Bank of Nigeria (CBN) are crucial to mitigate the fluctuations in the market. The implications of this depreciation are significant, as Okereke noted. A spiraling exchange rate could spell disaster for the economy, necessitating immediate action from regulatory authorities. The fluctuating rates have been attributed to a widening supply gap, prompting calls for improved liquidity to stabilize the market. Discussing possible measures to address the issue, Okereke underscored the need to bolster the country's reserves and enhance transparency to attract foreign investors. He mentioned the potential impact of the Travel Exchange window and external funding from institutions like the World Bank and IMF in easing the pressure on exchange rates. Furthermore, Okereke touched on the significance of the fixed income market in navigating the economic challenges. With portfolio flows dwindling and investors exercising caution, ensuring clarity and stability in policy decisions is paramount. He highlighted the yields on treasury bills and bonds, indicating the uncertainty looming over the market's future trajectory. As the conversation turned to the CBN's interventions, Okereke addressed concerns about the effectiveness of current measures. While acknowledging the limitations imposed by thin reserves, he expressed optimism about potential inflows and the role of foreign borrowing in restructuring the debt profile. Okereke emphasized the importance of adapting to changing market dynamics to alleviate the strain on exchange rates. In conclusion, Okereke emphasized the importance of proactive measures to bolster the naira and stabilize the economy amidst challenging conditions. While acknowledging the prevailing uncertainties, he outlined potential avenues for intervention and called for a coordinated effort to address the root causes of the currency's depreciation. As Nigeria grapples with the downward trajectory of its currency, the role of regulatory authorities and market participants becomes increasingly crucial in charting a path towards stability and growth.