In a bid to stabilise the naira, the Central Bank of Nigeria on Tuesday raised its benchmark interest rate by 200 basis points to 14 per cent, and maintained its existing cash reserve ratios for commercial banks.
This was disclosed by the Governor of the apex bank, Mr. Godwin Emefiele in Abuja.
However, the naira fell to 378 against the dollar at the parallel market on Monday, down from 375 on Friday as scarcity of the greenback continued to weigh on the local currency at both the interbank and black markets.
The dollar liquidity crisis at the interbank market has led to a continued pressure on the naira, causing consistent drops on the value of the naira at both the interbank and parallel markets.
At the interbank market, the naira slipped by 2.5 per cent to a new closing low of 310 per dollar.
Foreign exchange dealers said that the local currency fell after the CBN failed to lure in local investors or foreign players to the interbank market.
They said trading at the interbank market dried up on Monday in anticipation of an interest rate hike by the CBN’s Monetary Policy Committee on Tuesday.
The naira opened at a record low of 302.10 on Monday and traded a total of just $8.64m by the close, far less than $100.54mn on Friday, when the CBN spurred the market by selling some of its dollars, Reuters reported.
On Thursday, the naira fell through 300 against the dollar at the interbank market, a month after the CBN lifted its controls on the currency.
On Friday, it hit an all-time intraday low of 331 before recovering ground by the close of trading.
The CBN had hoped that scrapping the dollar peg and letting the currency fall by a third would help attract investment and erase the need for a black market, where the naira trades another 17 per cent weaker against the dollar.
But some foreign players have stayed out of the market, according to traders.
Analysts expect the MPC to raise interest rates, which should make the currency more attractive to foreign investors.
The CBN ditched its 16-month-old peg of N197/dollar in June to allow the naira to trade freely and lure back foreign investors who fled both the equities and bond markets in the wake of the plunge in crude prices.
On Friday, the CBN settled $697m of one-month outright currency forwards it sold in June at an exchange rate of 280 naira per dollar, to help quell dollar demand.
