Currency drops to N409/dollar, stocks fall on NSE

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August 29, 2016 4:05 PM

On the stock exchange, Skye Bank fell the most out of the suspended banks, dropping 7.81 percent, followed by Fidelity Bank which went down 3.0 percent.

A trader changes dollars with naira at a currency exchange store in Lagos February 12, 2015. REUTERS/Joe Penney

The Naira dropped to an all-time low of N409 to the dollar on the black market on Thursday, compared to the previous day after some banks were suspended from forex trading which really made dollars made to obtain.

The Central Bank of Nigeria (CBN) had suspended nine commercial banks from participating in forex transactions on Tuesday after the apex bank deemed them to owe money meant for the government - although one was readmitted after making a payment.

According to a Reuters report, shares in some of the banks hit by the suspension dropped by as much as 7.8 percent at the Nigerian Stock Exchange (NSE).

Following the drops, traders said the local currency fell due to the impact of the suspensions, worsening the dollar shortages which Nigeria has been suffering from due to the slump in oil prices.

"The suspension of some banks from transaction in the forex market has really increased pressure on the market," said Aminu Gwadabe, president of the Bureaux De Change Operators Association.

ALSO READ: Currency hits record low of 412 to dollar on parallel market - traders

Reports says bank executives have been meeting with CBN officials to resolve the forex issue as investors continued to dump their shares even on the following day.

On the stock exchange, Skye Bank fell the most out of the suspended banks, dropping 7.81 percent, followed by Fidelity Bank which went down 3.0 percent. FBN Holdings shed 1.9 percent while Diamond Bank and FCMB went down 0.8 percent.

Due to the falls, the main index dropped 1.8 percent.

On the interbank market, the currency increased 0.2 percent to close at N305 to the dollar with traders saying the rise was due to a CBN sale to prop up the currency. The CBN has been selling dollars almost every other day to boost liquidity.

Currency forwards have put the naira at N344.50 in a month's time. As at Thursday, the CBN settled $152.48 million of naira futures contracts which it sold in June at a rate of N297/dollar, further depleting its reserves, which is at its lowest in more than 11 years.

In June, the CBN had abandoned its currency peg, which allowed the naira to weaken by 40 percent in an attempt to bring in more foreign investment.

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