The Nigerian naira fell to its lowest level against the dollar in three years on the black market on Tuesday, traders said, a day after a historic oil price rout pushed U.S. crude futures below zero.
The naira touched 420 per dollar on the black market, for the first time since February 2017, 14% weaker than the official market rate.
The currency has been hitting new lows on the over-the-counter spot and black markets on thin volumes since last month after the central bank adjusted the naira’s official rate, implying a 15% devaluation. It was quoted at a low of 388.92 on the spot market on Tuesday.
A lockdown of Nigeria’s main cities this month to stop the spread of the coronavirus has slowed activities in the economy and the currency market particularly with the central bank running scanty operations and traders working from home. A crash in oil prices will also hurt the oil-producing country.
“It’s all about the corona pandemic and until the lockdown is lifted, we don’t expect improvement in liquidity,” one trader said.
Nigeria has reported 665 cases of the coronavirus and 22 deaths, the country’s Centre for Disease Control said on Monday.
The naira also weakened on the forward market. One-year dollar/naira non-deliverable forwards stood at 498.5 points, weakening from Monday’s close of 492.4, Refinitiv data showed.
Dollar demand has been swelling and piling up pressure on the naira, traders said. Importers with past due obligation are scrambling for hard currency while providers of foreign exchange such as offshore investors have exited.
U.S. oil futures traded in negative territory for the second day on Tuesday, after diving below zero for the first time ever on Monday, as concerns grew that the United States will run out of storage space for oil as the coronavirus lockdown leads to a supply glut.
Global benchmark Brent crude also fell sharply in response to the collapse of demand following reduced economic activity. June delivery was down $5.25, or 21% at $20.32 per barrel.
Nigerian crude is benchmarked to Brent. The West African country has been discounting its oil cargoes to find buyers, which could hurt public spending and its dollar earnings.