The Nigerian naira extended its decline midweek, weakening further against the US dollar in both the parallel and official foreign exchange markets. On Wednesday, the local currency depreciated to N1,570 per dollar in the parallel market, down from N1,565/$1 on Tuesday. This marks a continued downward trend since Monday, when the naira traded at N1,560/$1 in the unofficial market.
A Bureau De Change (BDC) operator in Wuse Zone 4, Abuja, attributed the depreciation to heightened demand for the US dollar and limited supply. These factors have exacerbated pressure on the naira, contributing to its sustained decline.
Official Market Also Feels the Pressure
In the official market, the naira mirrored the downward trend, closing at N1,502.00/$1 on Monday and slipping further to N1,513.10/$1 by Tuesday. Trading data from Tuesday revealed that the currency exchanged at N1,498.78/$1 (buying rate) and N1,499.78/$1 (selling rate), underscoring the persistent strain on the exchange rate.
Depreciation Extends Beyond the Dollar
The naira’s weakness was not confined to the US dollar alone. It also lost ground against other major currencies, including the British pound and the euro, in the parallel market. Over the past three days, the exchange rates for these currencies have shown consistent declines:
– British Pound (GBP): N1,955.00 (10-Feb), N1,950.00 (11-Feb), N1,975.00 (12-Feb)
-Euro (EUR): N1,620.00 (10-Feb), N1,595.00 (11-Feb), N1,600.00 (12-Feb)
This broad-based depreciation highlights ongoing volatility in Nigeria’s foreign exchange market. Analysts point to persistent forex demand pressures, speculative trading, and liquidity concerns as key factors driving the naira’s decline.
**Market Outlook and Policy Interventions**
Market analysts predict that the naira may face further depreciation in the short term unless the Central Bank of Nigeria (CBN) intervenes significantly or forex liquidity improves. Key factors influencing the currency’s trajectory include foreign portfolio inflows, external reserves management, and government policies.
The CBN has implemented several measures to stabilize the naira, including stricter regulations for BDC operators and efforts to boost dollar liquidity in the official market. CBN Governor Olayemi Cardoso has also warned of severe consequences for violations of the newly introduced Nigeria Foreign Exchange (FX) Code, reaffirming the bank’s commitment to transparency and ethical practices in the forex market.
Calls for Strategic Solutions
Stakeholders are urging a more strategic approach to address Nigeria’s forex challenges. Recommendations include boosting non-oil exports, enhancing forex inflows, and strengthening confidence in the financial system.
Since the relaxation of foreign exchange controls in 2023, the naira has lost approximately 70% of its value against the US dollar. As exchange rate fluctuations persist, businesses and individuals reliant on forex transactions continue to navigate an uncertain economic landscape.
The coming weeks will be critical in determining whether the CBN’s interventions and policy measures can stem the naira’s decline and restore stability to the foreign exchange market.
