In a concerning development, the Nigerian naira witnessed a significant decline, reaching N1089.51 against the US dollar on the official Investor and Exporter window. This represents a notable 27.19% drop from the N856.57/$ rate it closed at on the previous day, as reported by data from the FMDQ Securities Exchange.
Trading on Tuesday saw the naira opening at N922.22/$, fluctuating between a high of N1251/$ and a low of N720/$ before settling at the closing rate of N1089.51/$. The total forex turnover for the day amounted to $97.45 million.
This marks the fourth instance that the naira has closed below N1,000 on the official window, with the recent depreciation being the second lowest since the removal of the rate cap by the Central Bank of Nigeria (CBN).
Despite the CBN’s efforts to address foreign exchange challenges, including clearing backlogs of matured foreign exchange obligations to Deposit Money Banks, the naira’s decline persists. The CBN recently announced disbursements totaling $2 billion to address part of its backlog obligations, with estimates suggesting an outstanding debt of $7 billion in forward contract obligations.
Hakama Alia, the CBN Acting Director of Corporate Communications, emphasized the ongoing initiatives to settle remaining valid forward transactions, aiming to alleviate pressure on the country’s exchange rate and boost confidence in the economy.
The naira’s current devaluation comes at a time when the government is intensifying efforts to enhance liquidity in the foreign exchange market. The Minister of Finance and Coordinating Minister of Economy, Wale Edun, disclosed that the government had secured a $2.25 billion foreign exchange support facility from the African Import-Export Bank, the first tranche of a $3.3 billion facility intended to address FX shortages in the economy.
Commenting on the situation, Dr. Ayo Teriba, CEO of Economic Associates, attributed the naira’s volatility to insufficient foreign exchange supply. He urged the government to expedite efforts to attract foreign exchange inflows through investments and emphasized the importance of building reserves to stabilize the FX market.
Teriba expressed optimism about potential solutions, stating that proactive measures could lead to improved exchange rates, lower inflation, economic growth, and an enhanced standard of living. However, he cautioned that without prompt action, the volatility in the foreign exchange market could persist.
