The Naira experienced a record low on Monday, falling to N1,348.63 per dollar in the official market, also known as NAFEM (Nigeria Autonomous Foreign Exchange Market). This significant depreciation, representing a 33.87% decline from N891.90 recorded on the previous Friday, underscores the severity of current economic challenges. The Naira’s decline continues despite the Central Bank of Nigeria (CBN) releasing an additional $500 million to various sectors to address the backlog of verified foreign exchange transactions.
This marks the sixth time the Naira has breached the N1,000/$ threshold in the official market, reflecting a persistent trend of weakness. The first instance occurred on December 8th, 2023, when the currency reached a historical low of N1,099.05 per dollar.
The observed depreciation, unprecedented in historical performance, raises concerns about its potential impact on the broader economy. Despite recent CBN interventions, the downward trend persists, heightening worries about increased inflationary pressures and challenges for large and small businesses.
In terms of trading specifics:
- Intraday high: N1414.94/$1
- Intraday low: N701/$1
- Forex turnover at the close: $64.29 million (a 36.33% increase compared to the previous day)
Additionally, at the parallel forex market, where forex is sold unofficially, the exchange rate depreciated by 2.76%, quoted at N1,450/$1.
CBN’s Efforts and Strategy
The CBN has been actively addressing forex challenges, with recent releases and a commitment to settling all legitimate forex backlogs within a short timeframe. The central bank is implementing a comprehensive strategy to improve liquidity in the foreign exchange markets, aiming to streamline and unify multiple exchange rates, foster transparency, and reduce arbitrage opportunities. The focus is on addressing fundamental issues hindering the effective operation of the Nigerian FX markets.
The CBN’s initiatives include reforms designed to achieve a stable exchange rate, boost investor confidence, and attract foreign investment. The call for market participants to adhere to rules and ensure transparency emphasizes the importance of fair exchange rate determination. Despite these efforts, the challenges persist, posing ongoing concerns for Nigeria’s economic stability.
