The Naira suffered a sharp decline against the Dollar on Monday, reaching its lowest level ever in the foreign exchange market. The Nigerian currency closed at N993/$1, down by N203 from N789.94/$1 on Friday, according to data from FMDQ.
The market also witnessed a significant drop in turnover, as only $88.3 million was traded, compared to $259.8 million on Friday. This indicates a scarcity of forex supply and a high demand for the greenback.
In the parallel market, where the Naira is not regulated by the Central Bank of Nigeria (CBN), the exchange rate also deteriorated to N1200/$1 on Monday, from N1113/$1 on Friday.
The forex crisis in Nigeria has been worsened by the decline in oil prices, the country’s main source of foreign income, and the impact of the COVID-19 pandemic on the economy.
The Minister of Finance, Wale Edun, had announced last week that Nigeria would soon receive $10 billion in foreign currency inflows from various sources, including the International Monetary Fund (IMF), the World Bank, and the African Development Bank (AfDB), to ease the pressure on the Naira.
However, analysts have warned that these inflows may not be enough to stabilize the exchange rate, unless the CBN adopts a more flexible and market-driven forex policy. They also urged the government to implement structural reforms and diversify the economy away from oil dependence.