The Nigerian naira witnessed a historic decline to an unprecedented low of N1,534.39 per dollar on Monday, accompanied by a staggering 64.69% drop in forex turnover to $89.61 million.
This significant drop, amounting to 4.19% or N64.42, weaker than Friday’s closing rate of N1,469.97, underscores growing concerns regarding the currency’s trajectory.
The unprecedented depreciation signals the lowest point in the naira’s historical performance, highlighting the severity of the prevailing economic challenges.
Despite recent interventions by the Central Bank of Nigeria (CBN) to stabilize the foreign exchange market, the currency’s downward trend persists, raising concerns about its potential impact on the broader economy.
This development is expected to exacerbate existing inflationary pressures and further strain household budgets, particularly for those reliant on imported goods.
The implications for businesses, both large and small, are also significant, with potential increases in production costs and challenges in maintaining profitability.
Data from the NAFEM window showed the naira depreciated by 4.19% to close at N1,534.39 to a dollar at the close of business on Monday.
According to financial experts, market and participants’ confidence are crucial for stabilizing the exchange rate. Mr. Olatunde Amolegbe, the former President and Chairman of the Governing Council of the Chartered Institute of Stockbrokers (CIS) and the Managing Director of Arthur Steven Asset Management Limited, emphasized the importance of confidence in attracting foreign investment and retaining local investments.
He stated, “Confidence makes foreigners want to invest in your country and encourages locals to keep their investments here. Without these dynamics, demand will naturally outstrip supply, leading to the instability we are experiencing now.”
Mr Amolegbe also highlighted the need for structural changes to encourage import substitution, including improved security, better infrastructure, increased foreign direct investment, and promotion of local production. He emphasized that while the CBN’s efforts may boost market confidence, the desired impact might take time.