By Milcah Tanimu
The Nigerian naira has hit a new low against the United States dollar in the official foreign exchange market, despite recent interventions by the Central Bank of Nigeria (CBN).
As of Wednesday, August 28, 2024, the naira was trading at a concerning N1,606 per dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM), a significant drop from the previous day’s rate.
According to data from FMDQ Securities, the naira’s latest exchange rate represents a 0.86% decline, or N28.34, from Tuesday’s closing rate of N1,594.27 per dollar.
Despite the Central Bank’s efforts to stabilize the naira through various policies and market interventions, the currency’s value continues to deteriorate.
The ongoing depreciation highlights the complexities of Nigeria’s foreign exchange market, where demand for dollars frequently exceeds supply, especially during periods of heightened economic activity.
The naira’s decline is not confined to its exchange rate with the dollar. In the spot market, the currency also weakened against the British pound and the euro. The naira fell by N11.87 against the pound sterling, closing at N2,116.69/£1, compared to N2,104.82/£1 the previous day. Similarly, it dropped by N5.46 against the euro, settling at N1,782.62/€1, down from N1,777.16/€1 recorded on Tuesday.
The naira’s depreciation is attributed to the ongoing challenges faced by the Central Bank in managing high demand for foreign exchange. Seasonal factors, coupled with the activities of importers and multinational corporations seeking dollars for their operations, have placed significant pressure on the naira.
Despite the CBN’s efforts, the foreign exchange market remains volatile. On Wednesday, the value of FX transactions increased by 5.1%, or $4 million, reaching $160.94 million compared to $156.94 million in the previous session. However, this increase in transaction value was insufficient to prevent further decline in the naira’s value.
In the parallel market, also known as the black market, the naira held steady against the dollar, trading at N1,615/$1.
Financial experts have voiced concerns about the naira’s trajectory, calling for more comprehensive measures to address the underlying issues impacting the foreign exchange market. Recommendations include diversifying the economy to reduce import dependency, increasing foreign exchange reserves, and implementing policies to attract foreign investment.
