Naira Faces Steep Decline in Forex Markets Amid Dollar Scarcity

In a stark manifestation of the prevailing dollar scarcity, the Naira experienced its most significant plunge in the Nigerian Foreign Exchange Market (NAFEM) as it depreciated by 24%, reaching N1,348 per dollar. Data sourced from FMDQ reveals the indicative exchange rate for NAFEM dropped to N1348.63 per dollar, signifying a substantial 24% decline compared to the previous week’s N891.9 per dollar.

This marks the Naira’s lowest point since June 14th of the previous year when the Central Bank of Nigeria (CBN) unified multiple exchange rates in the official market. The volume of dollars traded on NAFEM also contracted by 28.5%, falling from $565.82 million the previous week to $404.5 million.

Simultaneously, the parallel market saw the Naira depreciate to N1,425 per dollar from the weekend’s N1,400 per dollar. Consequently, the gap between the official and parallel market rates narrowed to N76.37 per dollar, a significant reduction from the weekend’s N508.1 per dollar.

In a concerted effort to address the backlog of verified foreign exchange transactions, the CBN injected $500 million into various sectors. This move follows closely on the heels of the central bank’s payment of approximately $2.0 billion to settle outstanding commitments across manufacturing, aviation, and petroleum sectors.

The Acting Director of the Corporate Communications Department at the CBN, Mrs. Hakama Sidi Ali, emphasized the institution’s commitment to swiftly settling all legitimate foreign exchange backlogs. Reiterating Governor Olayemi Cardoso’s assurances, Sidi Ali highlighted the implementation of a comprehensive strategy aimed at enhancing liquidity in the Nigerian forex markets in the short, medium, and long term.

Addressing fundamental issues that have historically impeded the efficient operation of Nigerian forex markets, the CBN’s focus revolves around streamlining and unifying multiple exchange rates, fostering transparency, and reducing arbitrage opportunities. Sidi Ali expressed confidence that a stable exchange rate would instill investor confidence and attract foreign investment. She urged market participants to adhere to regulations, underscoring that market transparency is pivotal for fair exchange rate determinations, ensuring stability for businesses and individuals.

This move builds on the CBN’s recent endeavors, spanning several months, to release funds aimed at clearing the backlog of foreign exchange liabilities. The central bank continues to navigate challenges to stabilize the forex market and fortify the nation’s economic resilience.

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