By Grace Chigbu
The Nigerian currency, the Naira, has reached an unprecedented low against the US dollar, plummeting to N1,534/$ in the official Nigerian Autonomous Foreign Exchange Market on Monday. This marks a significant decline in its value, with a 3.93 percent drop from the N1,476.13/$ rate at the previous week’s close, according to data from FMDQ Exchange, the official platform for foreign exchange trading in Nigeria.
This recent depreciation underscores the lowest official exchange rate since the Central Bank of Nigeria (CBN) decided to float the national currency in June 2023, a move that has resulted in volatile fluctuations in its value against the dollar.
Interestingly, the Naira performed marginally better in the parallel market, trading between N1,480 and N1,490 on Monday.
The disparity between the official and parallel market rates has become more pronounced following FMDQ’s revision of its methodology for calculating the official exchange rate. This adjustment has contributed to the Naira’s depreciation from over 900/dollar to over 1,400/dollar.
The Naira’s struggle against the dollar has been ongoing, with the currency surpassing the N1,000/$ mark on the official window in December. On December 8, it reached an all-time low of N1,099.05/$, and the situation has continued to deteriorate, with the Naira reaching N1,348.63/$ on January 30, 2024, following another revision of FMDQ’s exchange rate calculation methodology.
In addition to the Naira’s depreciation, there has been a significant drop in dollar sales by banks, decreasing by 56.58 percent to $253.77 million on Friday from a peak of $584.53 million on Monday, the first trading day after the CBN’s directive to banks to offload excess dollars in the official FX market. Over the course of one week, commercial banks sold a total of $1.97 billion.
The continuous slide of the Naira highlights the persistent challenges facing Nigeria’s foreign exchange market. Despite efforts by the Central Bank and financial institutions to stabilize the currency and manage the supply and demand dynamics of foreign exchange in the country, the Naira’s value continues to face significant pressures.
This latest development underscores the need for comprehensive measures to address the underlying factors contributing to the Naira’s depreciation and to restore stability to the foreign exchange market. As Nigeria grapples with economic challenges, effective policies and interventions will be crucial in safeguarding the value of the Naira and promoting sustainable economic growth and development.
