Naira

Nigeria’s Foreign-Exchange Woes Intensify with Prolonged Naira Decline

Published

4 months ago

June 28, 2024

Naira to Dollar Exchange- Investors King Rate - Investors King

The Nigerian naira continues its downward spiral, making its ninth consecutive day of depreciation against the US dollar and the worst-performing currency in the first half of 2024.

The naira weakened by 0.2% to 1,510 per dollar by the close on Thursday, according to FMDQ.

This persistent decline represents the longest losing streak since July 2017, resulting in a year-to-date devaluation of 40%.

The naira’s performance stands out as the worst among global currencies tracked by Bloomberg, aside from Lebanon’s pound, which is undergoing severe economic turmoil and dollarization.

Analysts attribute the naira’s plunge to a combination of steep devaluation, insufficient dollar liquidity, and market volatility, which have hampered efforts to stabilize the currency.

“While the naira is undervalued and has seen significant adjustment, the supply of dollars needs to improve for the currency to be supported,” said Samir Gadio, head of Africa strategy at Standard Chartered Bank Plc in London. “Portfolio inflows have yet to pick up, even amid still-attractive local rates.”

Nigeria has been grappling with chronic foreign-exchange shortages and instability, largely due to reduced crude oil production and a lack of economic diversification.

The local unit has lost approximately 70% of its value against the dollar since June 2023, following policy changes introduced by President Bola Tinubu’s administration aimed at attracting foreign inflows to revive the economy.

The currency experienced heightened volatility between mid-April and May, driven by the imbalance between demand and supply for the greenback.

However, this volatility moderated in June with an improvement in dollar inflows.

Central Bank Governor Olayemi Cardoso recently expressed optimism about the future stability of the naira.

“The currency’s volatility may be a thing of the past,” Cardoso stated, highlighting efforts to promote investor confidence.

Since assuming office in September, Cardoso has increased interest rates by 750 basis points to 26.25%, cleared a foreign-exchange backlog, and negotiated multilateral dollar inflows to support the naira.

Despite these measures, the naira’s decline underscores the challenges faced by Nigeria’s economy. The currency’s depreciation has been accompanied by inflationary pressures, complicating monetary policy efforts and economic planning.

Besides the naira, other African currencies such as Egypt’s pound and Ghana’s cedi have also been among the world’s worst performers in the first half of 2024.

“Adjustment and rebalancing in 2024 after years of a heavily managed and misaligned currency regime account for the weakening of these currencies,” Gadio noted. For the naira, “what will matter going forward is whether it can stabilize on improving foreign-exchange inflows and perhaps see some appreciation.”

The ongoing decline of the naira highlights the urgent need for comprehensive economic reforms and effective foreign-exchange management to restore confidence in the currency and ensure sustainable economic growth. As Nigeria navigates these challenges, the path to stabilization remains fraught with uncertainty.

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Naira

Naira Weakens to N1,706 Per Dollar in Black Market, Sells N1,654 Officially

Published

11 hours ago

October 24, 2024

Iyanuoluwa Martins

The Naira weakened to N1,700 against the United States Dollar on the black market on Wednesday and extended this outcome further in the official foreign exchange (FX) market.

In the black market, the Naira lost N12.63 or 0.75 percent against the greenback to close at N1,706.43 to the US Dollar compared to N1,693.80/$1 it closed on Tuesday.

The Naira also fell by 0.06 percent on the US Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) extending the weakening of the local currency which started earlier in the week

The local currency exchanged for the US Dollar at N1,654.09/$1, sliding by N1.07 versus N1,653.02/$1 that it closed at the previous session on Tuesday.

The FX market has been volatile as recent efforts to bring some stability to the market through a series of auctions held by the Central Bank of Nigeria (CBN) for official dealers and Bureau de Change (BDCs) have not been able to tackle high seasonal demand.

With the year entering into the last two months, high demand has returned to the market and all eyes will be on what the CBN will do in that regard.

Data showed that there was a decrease in daily supply as the midweek turnover published on the FMDQ Group website stood at $136.68 million indicating that the session’s turnover made a 22.4 percent slide, indicating that there was a drop of $39.47 million compared to $176.15 million that was published in the last trading session.

The Naira also witnessed drops against the Pound Sterling and the Euro. It declined N9.86 on the British currency to wrap the session at N2,147.22/£1 from N2,137.36/£1 that it sold at the previous session.

In the same trend, against the Euro, the Nigerian currency dropped N9.67 and closed at N1,789.93/€1 versus N1,780.26/€1.

The Naira also dropped in its value against the British currency in the black market as it fell by N8.86 to sell at N2,212.37/£1 compared with the preceding session’s N2,203.51/£1 and followed the same pattern against the Euro as it depreciated N5.71 to quote at N1,844.79/€1 versus the previous day’s rate of N1,839.08/€1.

Meanwhile, the local currency further depreciated N3.54 to close at N1,233.01 per Canadian Dollar, compared to Monday’s N1,226.55 per CAD.

Naira

Naira Strengthens in Parallel Market Amid Official FX Depreciation

Published

1 day ago

October 23, 2024

Iyanuoluwa Martins

The Naira closed strong in the parallel market but weakened further in the official foreign exchange (FX) market as seasonal demand continued to affect the currency despite the fresh sale of FX by the Central Bank of Nigeria (CBN).

In the parallel market, the Naira gained N5.17 against the greenback to close at N1,693.80 to the US Dollar compared to N1,698.97/$1 it closed on Monday.

However, the Nigerian Autonomous Foreign Exchange Market (NAFEX), which serves as the official foreign exchange market, showed the Naira recorded a 3.1 percent depreciation against the US Dollar to N1,653.02.

At the previous session on Monday, the Naira closed lower at N1,603.16/$1, indicating a further decrease of N49.86 at the approved market.

A turnover of $176.15 million was on record at the market, according to data from the FMDQ Securities Exchange Limited. This indicated a $183.07 million or 50.9 percent decline versus the $359.22 million quoted recently.

The Naira also gained in its value against the British Pound Sterling in the official market by N9.73 to sell at N2,203.51/£1 compared with the preceding session’s N2,213.24/£1 and followed the same pattern against the Euro as it appreciated N6.21 to quote at N1,839.08/€1 versus the previous day’s rate of N1,845.29/€1.

Meanwhile, the local currency depreciated 74 Kobo to close at N1,226.56 per Canadian Dollar, compared to Monday’s N1,225.82 per CAD.

At the official market, the Naira witnessed gains against the British Currency and the Euro in the Tuesday session.

On the Pound Sterling, the local currency made a gain of N16.54 to wrap the session at N2,137.36/£1 from N2,153.90/£1 that it sold at the previous session and against the Euro, the Nigerian currency closed at N1,780.26/€1 versus N1,791.06/€1, indicating an N10.80 appreciation.

The CBN has not injected fresh FX sales into the market for yet another week after it promised to always prop the market.

Speaking in the US on Tuesday at the ongoing International Monetary Fund (IMF)/World Bank summit, the Nigerian Minister of Finance, Mr Wale Edun noted that Nigeria needed to boost its oil production to fix its FX issues.

“The key about the foreign exchange market really is supply and as you know we are an oil-producing country, we just need to get our oil production up and that will deal with that issue of foreign exchange supply and pressure on foreign exchange anytime there are large flows.”

Naira

Naira Weakens Against Dollar at Official, Parallel FX Markets

Published

2 days ago

October 22, 2024

Iyanuoluwa Martins

The Naira depreciated at the Nigerian Autonomous Foreign Exchange Market (NAFEM) and the parallel market on Monday, signifying more worries for the local currency.

At the official market – NAFEM – the local currency sold for the US Dollar at N1,603.16/$1 as it recorded a 0.15 percent or N2.38 drop versus N1,600.78/$1 it was valued at the previous session on Friday.

This occurred as supply rose at the opening session as turnover published on the FMDQ Group website stood at $359.22 million indicating that the session’s turnover went higher by 2.4 percent or $8.50 million compared to $350.72 million that was published the day before.

At the unofficial market, the domestic currency closed at N1,698.97 to the US Dollar, a drop of N8.15 compared to N1,690.82/$1 it closed during the Friday trading session.

The weakening of the Naira is happening as the nation’s external reserves continue to swell due to lower US Dollar volume sales to boost liquidity in the official FX market.

Latest data showed the balance in Nigeria’s foreign reserves inched to about $39 billion as CBN data revealed that Nigeria now has $38.992 billion as gross balance in the nation’s external reserves.

The CBN has not made do with its promise to prop up the market as it appears to have halted its weekly FX sales

In a different trend, the domestic currency witnessed a flat outcome against the British currency and the Euro in the week’s opening session.

On the Pound Sterling, the local currency closed at N2,153.90/£1 and N1,800.79/€1 on the Euro.

In the parallel market, the local currency depreciated in its value against the British Pound Sterling by N11.69 to sell at N2,213.25/£1 compared with the preceding session’s N2,201.56/£1 and followed the same pattern against the Euro as it lost N10 to quote at N1,845.29/€1 versus the previous day’s rate of N1,835.29/€1.

The local currency also depreciated further by N8.64 to close at N1,225.82 per Canadian Dollar, compared to Friday’s N1,217.18 per CAD.