The naira on Thursday depreciated to N478 to dollar at the parallel market as importers and manufacturers push unmet foreign exchange (forex) demand from official market into the parallel market.
The naira was last week exchanging at N470 to dollar, losing N8 in the last four days.
Data from the Central Bank of Nigeria (CBN) showed that spot rate or official exchange rate have remained stable at N379/$1.
Murega Mungai, Trading Desk Manager, AZA, a global forex trading platform, told foreign investors that naira was further weakened by uptick in consumer price index (inflation) from 13.7 per cent in September to 14.2 per cent in October, data from the National Bureau of Statistics (NBS) showed.
In a report titled: “Rising food prices add pressure for Naira”, he explained that the rise in inflation was caused by increase in food prices triggered by border closures, dollar restrictions, and robberies preventing farmers from producing food and supplying them to major cities.
“As economic indicators point to inevitable recession and increased default risk, we foresee downward pressure on naira extending towards the N480 to dollar level,” he said in emailed note to investors.
There are nearly $2.5 billion forex demand backlogs at the official market, with many manufacturers unable to bear unusual delay in forex access moving into the parallel market to source for dollars.
The forex demand backlogs stood at $1billion in May 2020, according to FBNQuest, the investment banking arm of FBN Holdings Plc.
According to the NBS report, October inflation figures indicates a persistent increase in 14 months and the highest recorded since March 2018.
Also, on a month-on-month basis, the Headline Index increased by 1.54 per cent in October 2020, this is 0.06 per cent rate higher than the rate recorded in September 2020 (1.48 per cent).
The composite food index, a closely watched component rose by 17.38 per cent in October 2020 compared to 16.66 per cent recorded in September 2020. On month-on-month basis, the food sub-index increased by 1.96 per cent in October 2020, up by 0.08 per cent points from 1.88 per cent recorded in September 2020.
The major drivers of food inflation were increases recorded in the prices of Bread and cereals, Potatoes, Yam and other tubers, meat, fish, fruits, vegetable, alcoholic and food beverages and oils and Emefiele