BY EMEKA EJERE
The depreciation of the Naira at the forward market has continued has continued as demand for the U.S dollar climbs up amid growing concerns that the Central Bank of Nigeria (CBN) may devalue the local currency again.
The forward market is an Over the Counter (OTC) market platform that sets the price of a financial instrument or asset for future delivery designed in contracts. Forward markets are used for trading a range of financial instruments, especially in the currency market.
The Nigerian currency was trading at N509 per dollar as at 4:30 pm on Monday, indicating that currency traders may have foreseen the naira falling to that rate before the end of 2020.
Last month, the CBN moved to combine the two rates (i.e., the official rate and rate for investors) when it devalued the naira from N307 to N360 to the dollar. The apex bank had also increased the rate for investors and exporters from N366 to N380 to the dollar on March 21, 2020.
In the meantime, some retail investors are trying to diversify their portfolios by shifting to foreign-dominated assets.
“For us to see to improved convergence in the rates, we need to see the central bank stepping into the foreign exchange market again to begin intervention sales.” Omotola Abimbola, an analyst at Chapel Hill Denha, told Bloomberg.
Since early March, after the CBN devalued the Naira by 15%, triggered by falling oil price, the Nigerian currency had been hitting low levels on the over-the-counter spot and black markets