Experiencing a continued decline, the Nigerian Naira crossed the N1,000 per dollar threshold for the second time in 2024 within the official foreign exchange (FX) market.
On Tuesday, it dropped to 1,089.51/$ from 856.57/$ the day before, as reported by the FMDQ Exchange based on Nigerian Autonomous Foreign Exchange Market (NAFEM) data. The initial breach of the N1,000 mark occurred on January 3, 2024, when the naira closed at N1,035.12/$ at the NAFEM.
On December 8, Naira experienced a decline, reaching 1,099.05/$, And later, on December 28, 2023, it further decreased to 1,043.09/$ in the foreign exchange (FX) market.
During Tuesday’s trading session, participants quoted Dollar at varying rates, with the highest bid at n1,251 and the lowest spot rate at N720/$. the daily FX market turnover surged by 63.34%, reaching $97.45 Million on Tuesday, compared to the previous day’s $59.66 Million.
The depreciation of naira is attributed to a combination of factors, including economic uncertainties, global market dynamics, and domestic fiscal challenges.
This decline raises concerns about its impact on households and the overall Nigerian economy. As the exchange rate worsens, the cost of imported goods rises, potentially leading to increased inflation and affecting households’ purchasing power. Businesses may also face challenges due to higher import costs, potentially hindering economic growth.
Authorities are closely monitoring the situation, making efforts to address the root causes of the naira’s decline and stabilise the foreign exchange market.
The latest monthly economic report from the Central Bank of Nigeria (CBN) reveals a notable 10 Percent month-on-month increase in total foreign exchange (FX) inflow, reaching $5.7 Billion in August 2023.
This increase is primarily attributed to a substantial 17 Percent quarter-on-quarter surge in Forex revenues from autonomous sources, amounting to $3.3 Billion. In contrast, FX inflow through the CBN, constituting 43 Percent of the total, experienced a modest -6 Percent month-on-month decline, settling at $2.4 Billion in August 2023.
Looking at the year-on-year perspective, there is a significant -19 Percent decline in FX inflow into the economy, dropping to $5.7 Billion in August 2023. The differing dynamics between monthly and yearly figures highlight the complexities influencing the foreign exchange landscape.
Analysts suggest that the surge in autonomous FX revenues may indicate increased economic activities or diverse sources of foreign exchange inflows. Conversely, the dip in CBN-mediated inflows might result from various factors, prompting a closer examination of the central bank’s policies and market dynamics.
As stakeholders evaluate the implications of these trends, there is a growing need for a comprehensive understanding of the factors influencing foreign exchange flow into the Nigerian economy, signaling potential areas for policy adjustments and strategic interventions.
