The Nigerian Naira plummeted to an unprecedented low of N1,043.09 per dollar. This decline was driven by heightened demand for the greenback, accentuated by a scarcity of dollars in the official foreign exchange (FX) market.
Following the day’s trading session, the local currency witnessed a notable depreciation of 19.54%, with the dollar quoting at N1,043.09, as opposed to the previous day’s rate of N872.59 at the Nigeria Autonomous Foreign Exchange Market (NAFEM). Market observers noted a pronounced dollar shortage, contributing to low liquidity, as the daily foreign exchange market turnover registered a 34.62% decrease, sliding from $127.93 million on Tuesday to $83.63 million on Wednesday.
Willing buyers and sellers maintained a bid rate of N1,235.65 for the dollar, consistent with the previous day’s spot trading. Meanwhile, the lower segment concluded with a bid rate of N720, displaying strength compared to Tuesday’s N740 per dollar.
The depreciation of the naira carries potential adverse consequences for the Nigerian economy. It may result in increased costs for imports, subsequently impacting consumers and businesses. Furthermore, the weakened currency can act as a deterrent to foreign investment and pose challenges for Nigerian businesses in the global market competition.
In response to ongoing currency challenges, the Nigerian government has implemented various measures to stabilize the naira. These measures include tightening monetary policy and intervening in the foreign exchange market. Despite these efforts, the naira’s depreciation trend against the dollar has persisted.
Noteworthy interventions by the Central Bank of Nigeria (CBN) include the consolidation of all FX market segments into the Investors and Exporters (I&E) window, now known as NAFEM, in June 2023. This initiative aimed at enhancing transparency and facilitating FX access for all market participants.
In October 2023, the CBN took a further step by reinstating 43 items previously prohibited from accessing FX, eight years after the initiation of a unified exchange rate. The CBN, committed to ensuring price stability, expressed its intention to bolster liquidity in the Nigerian foreign exchange market through periodic interventions. The central bank affirmed that, as market liquidity improves, these interventions would gradually decrease.
