Nigeria’s Naira Plunges to New Lows Amidst Surging Monetary Expansion

The Nigerian Naira has extended its downward spiral against the US Dollar as the local currency dipped further to N876/$ at the parallel market on Sunday, down from the N820/$ it exchanged in the previous session. 

The continuous slide in the Naira’s value can be attributed to a confluence of factors, including liquidity crunch, speculations, and other economic challenges.

Bureau de Change (BDC) operators have expressed their concerns about the volatile exchange rate, with Alhaji Sanni Abdul, a BDC operator in Lagos, stating that the Naira is currently being bought and sold at N850/$ and N876/$. Another BDC operator, Alli Ibrahim, pointed out that prices for goods and services are escalating, further adding to the economic uncertainty.

Dr. Muda Yusuf, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, attributed the situation to the monetary supply that surged by 15 percent between May and June 2023, with broad money increasing by over N9tn. This abrupt surge has undoubtedly impacted the exchange rate and raises concerns about macroeconomic stability, particularly regarding price stability.

The monetary authorities face mounting pressure to investigate and address the drastic growth in money supply to prevent further expansion.

The accumulation of unmet foreign exchange demand over the past few years has contributed to the current economic challenges, leading to a backlog of obligations in the investors’ and exporters’ window.

However, amid the grim outlook, there is a glimmer of hope for the Naira at the Investor & Exporter forex window, where it appreciated by 3.24 percent against the dollar in the previous week.

Data from the official trading platform of FMDQ Securities shows a slight appreciation of the Naira, bringing its value to 777.82/$. While this improvement offers a temporary respite, experts stress the need for comprehensive measures to stabilize the Naira in the long run.

The Central Bank of Nigeria faces a delicate balancing act in managing the Naira’s value amidst various economic challenges and external pressures.

As the country navigates these turbulent times, the focus remains on fostering economic stability and addressing the underlying issues contributing to the Naira’s continuous decline.