The official exchange rate of the Nigerian naira against the US dollar took a hit, ending its three-day winning streak and falling by 4.26% to N1,602.43 per US dollar on Tuesday, March 5, 2024. This decline, compared to N1,534.19/$1, was recorded in data published by FMDQ.
The drop in the exchange rate coincided with an announcement from the cryptocurrency trading platform Binance, stating its decision to cease trading activities involving the Nigerian currency.
The decline on Tuesday signals ongoing demand pressures in the forex market, coupled with insufficient supply.
FX Rates Across Markets
Data from the Nigeria Autonomous Foreign Exchange Market (NAFEM), the official forex trading platform, revealed a 4.26% depreciation of the domestic currency by the close of trading. The naira closed at N1,602.43 to a dollar, marking a loss of N68.24 compared to the previous day’s closing.
The intraday high reached N1,652.40/$1, while the intraday low stood at N1,450/$1, indicating a spread of N202.40/$1.
Forex turnover at the close of trading totaled $291.78 million, representing a 63.26% increase compared to the previous day. Trading activity has seen a consistent uptick in the official market, with turnover averaging over $200 million in the past week.
On the parallel market, the naira depreciated against the dollar, quoted at N1,630/$1, reflecting a 1.84% decline from the previous day’s quote of N1,600.
Market Performance Against Other Currencies
The Great British Pound (GBP) also saw depreciation, closing at £1/N2050, down by 7.32% compared to the previous day’s rate of £1/N1,900. Additionally, the naira weakened against the Euro by 0.57%, trading at N1750/EUR1 compared to N1740/EUR1 reported the previous day.
Analysis and Outlook
With the exchange rate surpassing N1,600/$1, the naira’s depreciation by 43% in 2024 highlights its status as one of the weakest currencies in Sub-Saharan Africa. Despite efforts by the central bank to address the forex crisis, challenges persist.
Cryptocurrency trading activities have often been cited as a factor contributing to the depreciation of the naira. However, critics argue that the currency’s weakness is inherent and extends beyond crypto trading influences.
The latest developments underscore the volatility and challenges facing Nigeria’s forex market, prompting stakeholders to explore sustainable solutions to stabilize the currency and restore investor confidence.
