The Nigerian Naira faced significant depreciation, falling to N1,400 against the US dollar on the black market, fueled by intensified demand pressure in the foreign exchange (FX) market.
This represents a 19.64 percent loss in just two weeks compared to the rate of N1,125 per dollar recorded on April 12, 2023. Concurrently, at the Nigerian Autonomous Foreign Exchange Market (NAFEM), the Naira depreciated to N1,308.52 per dollar on Wednesday, marking a 12.69 percent decline from the level observed on April 12, 2024.
The currency's retreat this week is attributed to decreased dollar liquidity, partly due to the departure of foreign portfolio investors (FPIs) rattled by the Israel-Hamas conflict and a strengthening dollar. Notably, the absence of hedging mechanisms such as Non-Deliverable Forwards (NDFs) and Exchange-Traded Derivatives (ETDs) has left FPIs vulnerable to geopolitical uncertainties.
The situation prompted a selling spree of fixed-income securities by FPIs seeking to repatriate capital. In response, the Central Bank of Nigeria (CBN) approved the allocation of $15.83 million to 1,583 Bureau De Change (BDC) Operators, aimed at stabilizing the FX market and enhancing foreign currency accessibility. This measure is expected to foster transparency and fair pricing, promoting economic stability amid prevailing market volatility.
