The Nigerian Naira witnessed a decline against the US Dollar in both the official and unofficial markets due to sustained demand pressure, exerting further strain on the country’s currency.
Despite the Central Bank of Nigeria (CBN) implementing various policies to enhance foreign exchange (forex) supply, the official forex trading platform, NAFEM, reported a 4.1% depreciation of the Naira, closing at N1,479.47 to a dollar after the trading day. This reflects a significant decrease of N60.69 or 4.1% compared to the previous closing rate of N1,418.78.
The intraday high and low were recorded at N1504/$1 and N946.82/$1, respectively, indicating a wide spread of N557.18/$1. Forex turnover at the close of trading stood at $321.23 million, representing a 57.52% increase compared to the previous day.
External reserves remained relatively stable at about $33 billion, a slight increase from $32.9 billion at the beginning of the year.
In the official market, the closing exchange rate crossed N1400/$1 on January 30, 2024, and has remained above this level since then. The intra-day high rate has consistently been above N1,500 for eight consecutive days.
In the parallel market, where the exchange rate is unofficially determined, the dollar sold for as high as N1,500/$1, with the £1/N1,890 and EUR1/N1,600. This market has maintained a level around N1400/$1 since January 25, 2024, reaching N1,500 on February 2, 2024.
In the cryptocurrency market, where forex is transacted using stablecoins, the rate stood at N1,489/$1 as of the latest check on Thursday. The cryptocurrency market surpassed N1,400 on January 25 and has remained close to N1,500/$1 since then.
Black market operators reported that demand pressures continued to rise, with Nigerians increasingly opting for dollarization. Many individuals are holding a significant portion of their assets in dollars, selling their naira assets to acquire dollars as a hedge against high inflation, which reached 28.9% as of December 2023.
The CBN recently signaled its monetary policy direction by accepting treasury bill bids at a rate of 19% per annum. This move aims to attract forex inflows, and its impact has already been observed with an increase in daily forex turnover.
Reporter: Tobi Adetunji
News Sources: Techeconomy
