The Nigerian naira experienced a recent decline in both official and parallel foreign exchange markets on Friday. The national currency closed at N1,670/$ at the parallel market and N1,537/$ at the official rate, signifying a N133 gap between the two markets and raising concerns about round-tripping activities.

Despite the increased dollar supply of $3.83 billion in eleven days through the Nigerian Autonomous Foreign Exchange by Deposit Money Banks, concerns about forex market irregularities persist. The improved liquidity at NAFEM followed a directive by the Central Bank of Nigeria, instructing banks to sell their excess dollar stock and enhance liquidity in the FX market.

Analysis of the weekly turnover at the official FX market revealed fluctuations in supply, prompting the CBN to issue guidelines aimed at curbing round-tripping and hoarding activities by banks. The gap between official and parallel market rates has widened, indicating potential challenges despite the CBN’s liquidity-boosting efforts.

Moreover, the directive from the CBN has led to operational adjustments by banking institutions and IMTOs in accommodating the revised remittance framework, which is expected to increase remittance inflows and bolster the country’s foreign exchange reserves.

Dealers attribute the naira’s depreciation to strong demand for dollars by speculators and individuals traveling for various purposes. Currency traders in Abuja have reported consistent demand for the dollar, resulting in rates approaching N1,700.

Amidst these developments, the National President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture has urged the government to address the challenges of naira devaluation and inflationary pressure. Stable currency, according to the NACCIMA, will make agricultural inputs more affordable and bolster consumer purchasing power, necessitating a robust economic policy to defend the naira and stabilize exchange rates at 750 Naira to one USD. The focus on local food production to achieve food security has received support, although it’s acknowledged that the depreciating value of the naira contributes significantly to inflationary pressure on food prices.

The appeal for enhanced security and infrastructure in farming communities reflects the need to mitigate risks faced by farmers and improve efficiency in the agricultural value chain. The inflationary pressure and exchange rate crisis underline the urgency for comprehensive measures to stabilize the currency and support local production.