The Nigerian naira has hit a multi-week low, failing to sustain its ₦1,650/$ support level in the official market. At the close of trading last week, data from the Nigerian Autonomous Foreign Exchange Market (NAFEM) revealed the naira depreciated further to ₦1,652.25/$1, reflecting ongoing pressure despite interventions by the Central Bank of Nigeria (CBN) and attractive fixed-income yields.
In the parallel market, the naira fared even worse, trading at ₦1,750/$1 by the end of the week. This marks a significant decline in value, with the naira losing over 70% of its worth since mid-2023.
Despite a boost in Nigeria’s foreign exchange reserves to $40 billion, the highest level in 32 months, the local currency continues to face headwinds. Analysts point to weak oil production, high inflation, and limited foreign direct investment as key factors exacerbating the foreign exchange crisis. Additionally, surging demand for dollars in the parallel market and sluggish dollar disbursements by the CBN are compounding the problem.
This decline in the naira’s value has had far-reaching effects on Nigeria’s economy, including a significant rise in import prices, which has deterred importers and reduced import volumes. The total merchandise import value for the 12 months ending June 2024 stood at $45.5 billion, a 20% decrease compared to $57.1 billion recorded during the same period the previous year.
Looking ahead, the outlook for the naira remains bearish. According to BMI, a division of Fitch Solutions, the currency could weaken further to ₦1,993/$ by 2028. Economic projections, however, suggest that Nigeria’s growth could rebound to 3% in 2024, compared to 2% in 2023, signaling hope for a gradual recovery.
The naira’s struggles highlight the need for comprehensive economic reforms to stabilize the foreign exchange market and support the broader economy.
