The naira depreciated to a new low in July, closing at N1,563.80/$1 on Friday, July 12, 2024, after a brief appreciation period the previous day. According to data from the FMDQ, the exchange rate fell by 0.59% from N1,554.65/$1, as recorded on Thursday at the NAFEM window.
Central Bank FX Sales and Market Reaction
This depreciation comes after the Central Bank of Nigeria (CBN) sold $122.67 million to 46 authorized dealers over two days. Despite these sales, the naira traded between a low of N1,496.46/$1 and a high of N1,586/$1 on Friday, inching closer to the N1,600 ceiling.
FX Turnover Fluctuations
Foreign exchange (FX) turnover significantly decreased by 63.73% on Friday, marking the first drop this week. The turnover had increased earlier in the week, starting with a 14.19% rise to $133.46 million on Monday. This was followed by a 41.01% increase to $188.19 million on Tuesday and a 25.78% rise to $236.7 million on Wednesday. The peak was reached on Thursday with a 47.37% increase, bringing turnover to $348.82 million.
CBN’s Recent FX Transactions
On Wednesday, the CBN sold $67.5 million to 27 authorized dealers and purchased $2.5 million from one dealer, with bid ranges between N1,480/$1 and N1,500/$1. These transactions are set to be settled by July 12, 2024. On Thursday, the CBN sold $55.17 million to 19 authorized dealers at N1,540.0/$1, with payments due on July 15, 2024. The CBN emphasized that all FX purchases must be used for trade-backed transactions and reported within 72 hours.
Despite the CBN’s efforts, the official market experienced its first crash of the week, with turnover falling to $126.5 million. In May, the naira had seen consecutive double-digit appreciation due to increased dollar sales by the CBN ahead of a $1.3 billion non-deliverable forward (NDF) maturing on May 29, 2024. Sources indicated that the CBN sold foreign currency below market rates to lower the exchange rate artificially.
Following the CBN’s recent FX sales, the naira broke a three-day depreciation streak on Thursday, closing at N1,554.65/$1. However, this recovery was short-lived, as the local currency hit a new low in July. Nairametrics had earlier projected potential currency weakness during the summer holidays when many Nigerians travel abroad. This week’s steady depreciation occurred despite CBN Governor Yemi Cardoso’s assurances that the worst of the naira volatility was over.
