Currency Market Fluctuations Grip Nigeria as Exchange Rates Witness Volatility

The parallel market in Nigeria witnessed substantial fluctuations in exchange rates on Monday, as the value of the local currency, the naira, faced significant changes against major international currencies.

The US dollar, a pivotal currency, surged to N874.3 against the naira in the parallel market, displaying a notable increase from the N832.9/$1 rate it concluded at on the preceding Friday. This marked a significant shift within a short period.

The pound sterling, another influential currency, followed suit, appreciating by N54.2 kobo, with the exchange rate reaching N1129.6/£1 in the parallel market. This was a substantial surge compared to the N1075.4/£1 average rate recorded on Friday.

In parallel, the euro, the European currency, witnessed a surge as well, reaching an average rate of N965.2/€1, which diverged from the previous day’s rate of N918.4/€1.

However, the official exchange rate between the naira and the dollar, as reported by the FMDQ Exchange, stood at N761.32/$1 on Monday. This was a contrast to the N739.52/$1 rate observed on Friday, signifying an increase of N21.8 kobo in the dollar’s value. Consequently, the Nigerian currency’s value depreciated by 2.94 percent within the official market.

Authorized dealers and their clients engaged in foreign exchange transactions, witnessing a range between the highest rate of N799.90/$1 and the lowest rate of N700/$1.

Amid these fluctuations, a total of $64.93 million was transacted in foreign exchange by authorized dealers and their clients, indicating a decrease in transaction value due to the heightened dollar rate.

Simultaneously, the Investors’ and Exporters’ window saw a decline in foreign exchange value, with transactions dropping by $65.99 million or 50.4 percent compared to the preceding day’s transactions of $130.92 million.

In a parallel development, recent data from the Central Bank of Nigeria (CBN) revealed a decline in Nigeria’s currency in circulation for July 2023. The currency in circulation decreased from N2.6 trillion in June to N2.59 trillion, marking a decrease after several months of stability. The currency outside banks also experienced a slight dip from N2.26 trillion in June to N2.20 trillion in the review month.

The CBN continues to implement various strategies to stabilize the naira and mitigate inflation, including adjustments to the cash reserve ratio (CRR) of banks, open market operations (OMO), and exchange rate regime modifications.

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