The Nigerian naira has experienced further depreciation, closing at N1,603.80/$1 on the Nigerian Autonomous Foreign Exchange Market (NAFEM) window on Thursday, July 25, 2024. This marks the lowest level for the naira since March 14, 2024, when it traded at N1,608.98/$1, breaking through the N1,600 ceiling.
According to data from the FMDQ Securities Exchange, the naira depreciated by 1.07% from N1,586.71/$1 recorded the previous day. The local currency traded at a high of N1,620/$1 and a low of N1,519/$1 amid significant demand pressure.
This depreciation comes just three days after the naira posted impressive gains against the dollar, recording its best performance since March. However, the recent decline in foreign exchange (FX) turnover has exacerbated the naira’s struggles. FX turnover fell by 23.35%, from $171.03 million to $131.09 million on Thursday.
Despite assurances from the Central Bank of Nigeria (CBN) to support various segments of the official markets with liquidity, the naira continues to face severe depreciation. Last week, the CBN announced the sale of $106.5 million to 29 FX dealer banks, marking the second time this month that the CBN made FX sales to authorized dealers in an attempt to stabilize the market.
In a further effort to strengthen the naira, the CBN approved the sale of FX to eligible Bureau De Change (BDC) operators to meet demand for invisible transactions. Each BDC was authorized to sell $20,000 at the rate of N1,450/$1, representing the lower band of the trading rate at NAFEM from the previous trading day.
Despite these interventions, the naira has continued to depreciate throughout July. The CBN has attributed recent market movements to corporate demand pressure and the seasonal summer uptick, with a bullish dollar index and increased demand for foreign currencies during summer vacations adding significant pressure on the naira.
CBN Governor Yemi Cardoso recently claimed that the country has already experienced the worst of naira volatility regarding foreign exchange. In an interview with Bloomberg TV in London, Cardoso expressed satisfaction with how the currency crisis has been managed over the past few months. He indicated that future currency value would depend on various factors, including fiscal policies, and noted that efforts to stabilize the market are ongoing.
Financial analysts at United Capital Plc have forecasted that the exchange rate will stabilize, trending between N1,423.26/$ and N1,550/$ by the end of 2024.
