Naira officially slumps to 334.50/$1

The naira fell to a new record low on Wednesday at the official market, following the central bank’s decision to hike interest rates to 14 percent on Tuesday. 

The naira fell to an all-time low of 334.50 to the dollar, from about 313/$1 earlier in the day.

Investors expect that the local currency will fall as low as 350, before it starts to appreciate against other foreign currencies.

According to Reuters, investors were pushing the currency lower to test the limit of how far it can fall, given a spread of almost 12 percent between the official and black market naira rates.

Godwin Emefiele, governor of the Central Bank of Nigeria, said on Tuesday after the monetary policy committee meeting that investors’ attitude had remained lukewarm owing to negative interest rate.

“Members also noted that the negative real interest rates did not support the recent flexible foreign exchange market as foreign investors attitude had remained lukewarm, showing unwillingness in bringing in new capital under the circumstance,” he had said.

Emefiele said the committee noted that “there existed a substantial amount of international capital in negative yielding investments globally and Nigeria stood a chance of attracting such investments with sound macroeconomic policies”.

“Consequently, members were of the view that an upward adjustment in interest rates would strongly signal not only the Bank’s commitment to price stability but also its desire to gradually achieve positive real interest rates.”

With the CBN economics, corroborated by Muhammad Sanusi, former governor of the bank, the naira is expected to firm up after sinking below 300 to the dollar.