In a historic development on December 8th, 2023, the Nigerian Naira experienced an alarming depreciation, closing at an all-time low of N1,099.05 per dollar in the official market. This 23.29% drop in value, compared to the previous closing rate, raises significant concerns just weeks before Christmas.
This marks a pivotal moment as the Naira breaches the N1,000/$ threshold for the first time, posing severe implications for the economy. Despite efforts by the Central Bank of Nigeria to stabilize the foreign exchange market, the downward trend persists, intensifying worries about the approaching holiday season.
The impact is far-reaching, amplifying inflationary pressures and straining household budgets, especially for those reliant on imported goods. Businesses, both large and small, face challenges in maintaining profitability due to potential increases in production costs.
Data from the NAFEM reveals a 23.29% decline in the local currency, closing at N1,099.05 to a dollar. However, the parallel forex market reports a marginal depreciation, reflecting the complexity of the situation. The Central Bank's extension of timelines for letters of credit issuance and other transactions underscores the ongoing struggle with foreign exchange scarcity.
The move to unify all segments of the forex market in June 2023, intended to enhance liquidity and stability, appears to have had unintended consequences, further destabilizing the market. The Naira's significant loss of value on the official Investor and Exporter forex window has disrupted local and international trade, leading to reports of foreign suppliers rejecting letters of credit from Nigerian businesses.
In response to the crisis, the Central Bank has adjusted timelines in its service charter, extending the issuance of letters of credit and registration of Form M and NXP. These changes, though aligned with the Business Facilitation Act 2022, indicate the severity of the situation.
Financial experts, witnessing the Naira's free fall, advocate for de-dollarization to restore strength. Dr. Biodun Adedipe of B. Adedipe Associates Limited proposes transparent dealings at the I&E Window, declaring local transactions in US dollars illegal, and shifting the sale of crude oil to local refineries to Naira. These recommendations, coupled with direct engagement between President Bola Tinubu and bank CEOs, aim to generate ideas and garner support for essential market reforms.
As the nation grapples with this economic crisis, the call for strategic measures and collaborative efforts becomes imperative to navigate the challenges posed by the Naira's unprecedented decline.
Source: Nairametrics
