The Naira dropped to N363 to the dollar on the parallel market yesterday, compared to the N362 to the dollar it was previously.
This is also as the gap between banks’ bids to buy and sell the Naira to investors was widening due to a tight supply of dollars in the market, suggesting the currency was coming under international pressure even as government finances improve.
According to Reuters, some lenders are seeking to sell the Naira at N365 per dollar to investors, while others offered to buy at N359 to the dollar.
It also stated that banks were trading between themselves at N362 per dollar.
The currency bid-offer spread has been much tighter in the past, usually ranging between N359 and N360 to the dollar.
The naira had been relatively stable at N360 to the dollar for months after the central bank in April 2017 introduced the Investors’ and Exporters’ window.
Part of the latest shortage of dollars is due to offshore funds dumping Nigerian bonds following a fall in yields and multinationals repatriating their dividends, Reuters stated.
Traders also said the central bank has reduced its issuance of open market bills and lowered the interest rates it offered, signalling a more dovish stance on interest rates that nevertheless makes the currency less attractive for foreign investors.
This shift at the central bank comes after the federal government paid off some of its treasury bills rather than rolling them over as it has done in the past, in a move to lower its borrowing costs.
This has made investors pull funds away from Nigerian fixed income securities, which coupled with firms repatriating dividends abroad puts pressure on the currency market.
In one example of the currency pressure from dividends, the Nigerian unit South Africa’s MTN had declared a dividend of N50 billion in 2017 and paid a further dividend in the first quarter, which it said it would repatriate to offshore investors – meaning it would sell that amount of Naira.