Nigeria naira, reserves down on strong demand for dollar

Nigerian naira fell to its record low at the interbank market on Thursday after the West African country’s forex reserves dropped significantly as a result of huge sale at the forex market to prop up the value of the local currency by the central bank.

The naira closed at 325 to the dollar on the official market, after it initially depreciated to a low of 365 to the dollar at the official window. The local currency closed at 309 to the dollar the previous day.
Forex reserves dropped to $25.78 billion as of August 16, down 2.11 percent from a month ago, central bank data showed on Thursday.
The central bank has been selling dollars almost daily on the interbank market to prop up the currency. The naira touched an all-time low of 365.25 per dollar on Thursday.
Nigeria’s currency has slumped 38 percent since the central bank ended a 16-month peg of 197-199 per dollar on June 20. The capital controls needed to defend the fix sent foreign investors fleeing and took the West African country to the brink of recession. The International Monetary Fund forecasts a 1.8 percent contraction of the economy this year.

On the parallel market, the local currency flat at 394 to the dollar as Bureau de change operators get dollar liquidity support from money transfer agencies.