Nigeria’s Naira-Dollar Exchange Rate Stabilizes Despite Cash Crunch

Despite a cash crunch and growing demand pressure, Nigeria’s Naira-dollar exchange rate has remained relatively stable across official and parallel foreign exchange markets.

The Naira has been trading at around N461 to N462 per dollar since the beginning of the year at the Investors and Exporters forex window, which is Nigeria’s official foreign exchange market. Meanwhile, at the parallel market or black market, the Naira has been trading at around N750 to N765 per dollar.

Most currency dealers who participated in Monday’s foreign exchange market auction maintained bids between N460.00 (low) and N462.43 (high) per dollar. Although the Naira has depreciated by 0.04 percent on a day-to-day trading basis, the dollar’s price has remained stable at N461.50.

At the open market last week, the Naira edged out the United States dollar, appreciating by N5 or 0.7 percent week-on-week to close at N746/USD from N751/USD in the previous week. However, the scarcity crunch continues to bite harder, causing dollar demand to take a calm in the face of scarcity.

Nigeria’s external reserves, which give the Central Bank of Nigeria (CBN) the firepower to defend the Naira, have declined to $35.74 billion as of March 24, 2023, but picked up to $36.67 billion as of Tuesday.

Despite these challenges, Bismarck Rewane, Managing Director/Chief Executive Officer of Financial Derivatives Company Limited, predicts that the Naira will strengthen to N680 per dollar this year.

Analysts at Cowry Asset Asset are predicting range-bound price action across the foreign exchange market this week.

They said, “We expect the naira to trade in a relatively calm band across various market segments this week, barring any market distortion in the face of the Naira scarcity and as the apex bank continues its weekly FX market intervention to defend the value of the naira.”