Naira hits a record low of N745/$ at the black market

Thursday, October 20, 2022: The rate at which the naira exchanges for the dollar at the parallel market slumped to a new all-time low of 745 as of the close of trading on Thursday, having lost 0.3 percent of its value day-on-day. In recent months, the naira has depreciated rapidly against the greenback, falling by 31% year-to-date.
 
The fall in the value of the currency of Africa’s largest economy together with inflation which has remained entrenched has raised eroded living standards across the country. 
 
Accordingly, the Central Bank of Nigeria has resorted to aggressive interest rate increases to defend the naira from falling further, given the appreciation of the dollar and rate hikes by the US Federal Reserve Board. Consequently, expectations of the CBN tampering of monetary policy are impacting investors’ sentiments. Investors in fixed-income securities are becoming increasingly risk-averse as their interest rate risk exposure has broadened. 
 
Similarly, trading activities at the B2B market show that the exchange rate between the naira and dollar stands at about N746/$ for the same period being reported. This is based on the information obtained from BDC operators in Lagos. 
 
Investors and Exporters Window
Thursday, October 20, 2022: The exchange rate between the naira and dollar at the Investors and Exporters (I&E) Window settled at N441.13/$ as of the close of trading. The dollar/naira rate opened the day’s trading on a bullish note as the naira exchanged for a dollar at N440/$1. However, As the intra-day trading progressed, it dropped (0.3 percent) to close at 441.13. Meanwhile, the naira has been hovering around N441/$1 for the past seven days, depreciating by 0.02 percent week-on-week.
 
An exchange rate of N442/$1 was the highest rate recorded during the intra-day trading before it settled at N441.13/$ at the end of the trading session, while it also traded as low as N423/$ during intra-day trading. According to data from FMDQ, a total of $108.56 million was traded at the Investors and Exporters (I&E) Window for the reporting period. 
 
Foreign Reserves
The gross external reserve of Nigeria has been declining since the beginning of the month. According to data from the CBN, as of October 18, 2022, the country’s reserve base stands at $37.76 billion. It declined by $86 million (0.09 percent) from the 37.80 billion recorded as of October 17.
 
Sidelines
The Ghanaian currency, the cedi, has become the worst-performing currency in the world after it lost 45.1 percent of its value to the United States dollar in 2022.
 
Naira is also part of the currencies with a significant depreciation in this year 2022. The Bank of America, in a recent update, stated that the official naira to dollar rate is overvalued by 20 percent. An assessment of the currency by the bank revealed that will likely weaken to N520/$.