The value of the Nigerian naira tumbled to N1089.51 per US dollar on the official Investor and Exporter window, marking a stark 27.19% decrease from its previous close at N856.57/$. Data from the FMDQ Securities Exchange revealed this significant depreciation on Tuesday.
The day witnessed the naira commencing trading at N922.22/$, reaching a peak of N1251/$, a low of N720/$, and ultimately concluding at N1089.51/$. The total forex turnover amounted to $97.45 million, underscoring the currency’s volatility and the size of the forex market.
This occurrence marks the fourth instance where the naira closed below N1,000 on the official window, reflecting the ongoing challenges faced by the Nigerian currency. Earlier on December 8, 2023, the naira plummeted to an all-time low of N1,099.05/$. Subsequently, on December 28, 2023, it wrapped up trading at N1043.09/$, and on January 3, 2024, it concluded at N1035.12/$.
Despite efforts by the Central Bank of Nigeria (CBN) to address the situation by clearing backlogs of matured foreign exchange obligations to the Deposit Money Banks, the naira’s downward spiral persists. The CBN disclosed disbursing $61.64 million to foreign airlines as part of matured foreign exchange owed to them, with reports indicating outstanding obligations of $7 billion in forward contracts.
The continuing depreciation of the naira is juxtaposed against the government’s renewed drive to enhance liquidity in the foreign exchange market. The Minister of Finance and Coordinating Minister of Economy, Wale Edun, disclosed that the Federal Government secured a $2.25 billion foreign exchange support facility from the African Import-Export Bank at the close of 2023, aimed at addressing FX shortages in the economy.
Dr. Ayo Teriba, Chief Executive Officer of Economic Associates, emphasized that the naira’s volatility stems from inadequate foreign exchange supply and dwindling reserves. He underscored the need for the government to actualize plans to attract investors to bolster FX supply, potentially stabilizing the naira and fostering economic growth.
Teriba expressed optimism about the possible steps that Nigeria could take to address these issues, emphasizing the importance of building reserves to improve the FX market and uplift living standards.
The dynamic between the naira and the US dollar has far-reaching implications, not only for the Nigerian economy but also for global investors and foreign exchange markets. The concerted efforts of the CBN and the Nigerian government to address these challenges will be closely observed, as the stabilisation of the naira holds significance for both domestic and international stakeholders.
