Nigeria naira reaches record low against US dollar on official market

Nigeria's naira dropped to a record low against the US dollar on the thinly traded official market, FMDQ Exchange data showed this week, as the currency swung widely to overshoot the unofficial parallel market rate.

The naira fell as low as 1,421 to the dollar, FMDQ data showed, compared with around 1,400 naira quoted on the parallel market. The currency later closed at 891.90 naira on Friday on the official market.

The latest fall occurred after central bank Governor Olayemi Cardoso last Wednesday said the bank was trying to improve liquidity in the foreign exchange market.

Kyle Chapman, FX markets analyst at London-based Ballinger & Co. said the naira has overtaken the record low level it hit on the parallel market which could hamper the influx of capital needed to stabilise the exchange rate.

'Self-perpetuating spiral'

"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 naira's official exchange rate has been drifting towards the parallel market level as the central bank is yet to clear outstanding amounts owed in forward deals, worsening a shortage of foreign-currency in the West African nation.