In a dramatic turn of events, the official exchange rate between the naira and the dollar plummeted to an unprecedented low of N1,534 on the NAFEM market, marking the weakest point in the currency's history. The day's forex turnover, a mere $89 million, revealed a sharp 64.69% drop in comparison to previous days, raising concerns about the sustainability of current economic policies.
The sharp depreciation, amounting to a 4.19% decline from the previous closing rate, raises alarms about the broader economic impact. This unprecedented downturn is expected to exacerbate inflationary pressures, posing challenges for businesses, both large and small. Increased production costs and potential profitability issues loom large in the wake of this historic decline.
Financial experts, including Mr. Olatunde Amolegbe, former President of the Chartered Institute of Stockbrokers, weigh in on the situation. Amolegbe emphasizes the critical role of market and participant confidence in stabilizing the exchange rate. He underscores the importance of long-term structural changes, such as improved security, infrastructure, and increased foreign direct investments, as crucial elements in restoring stability.
While the CBN's current efforts are acknowledged as positive for market confidence, experts like Amolegbe suggest that the impact may manifest in the medium term. The focus on reducing currency speculation through monetary policy tools is seen as a step, but the need for deliberate, comprehensive structural changes becomes increasingly apparent in the quest for economic recovery and stability.
