The naira tumbled against the United States dollar on the parallel market to 503 on Thursday, down from the 500 recorded on Wednesday.

The local currency had closed at 499 and 498 on Tuesday and Monday, respectively.

This came almost two weeks after the naira touched 500/dollar briefly and returned to 498/dollar.

The local currency had been stable against the greenback for about three weeks.

Economic and financial experts are divided over the outlook for the naira this year but many have said the local currency may depreciate further in the coming months.

The external reserves also rose to $28.6bn on February 8, the Central Bank of Nigeria’s data showed on Thursday.

The naira might fall to around 520/dollar, the Chief Executive Officer of Lagos-based research firm, Financial Derivatives Company, Mr. Bismarck Rewane, had said.

On the official market, it remained at 305.25/dollar, where it has been trading since last August.

The CBN last week sold $660m in three and five-month currency forwards at an auction aimed at clearing a backlog of dollar demand.

But traders said it was not enough to satisfy the market.

“Despite rising FX reserves, it’s the amount of the FX that is supplied that matters. The parallel market, by its nature, is particularly sensitive to demand-supply imbalances, and has a tendency to overshoot,” Reuters reported, quoting the Head of Africa Research at Standard Chartered Bank, Razia Khan.

“Supply of FX matters more than any other factor,” she added.

Traders said the CBN had been selling dollars on the official market to support the naira, but dollar shortages were causing the local currency to weaken on the black market.

The naira lost a third of its official value against the dollar in 2016 after the CBN scrapped its peg for the currency, allowing the naira to float on the interbank market, in a bid to alleviate dollar shortages

On the Bureau de Change segment, the naira closed at N399/dollar, while the pound sterling and euro closed at N617 and N527, respectively.

Traders said that the scarcity of the greenback was far from being over.

The forex exchange reserves have gained more than $2bn so far this year, rising from $25.8bn on December 30, 2016 to $28.2bn on February 2, 2017.

Update: The Naira slid further on Friday against the US dollar to close at 506 on the parallel market.

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