The Nigerian naira has plunged to N1,740 per dollar in the parallel market, reversing earlier gains and raising concerns over economic stability. Minor appreciation was noted in the NAFEM, but analysts warn that supply shortages and increasing demand could lead to further depreciation in the coming months.
As the Nigerian naira reaches a staggering N1,740 per dollar in the parallel market, economists and traders are expressing growing alarm over the currency's persistent depreciation. This alarming trend marks a significant reversal from earlier gains, raising concerns about the stability of the nation’s economy.
Despite the naira's decline in the black market, there was a minor appreciation observed in the Nigerian Autonomous Foreign Exchange Market (NAFEM), where the currency stabilized at around N1,600 per dollar, reflecting a slight improvement from previous rates. Dealers speculate that the Central Bank of Nigeria (CBN) may soon intervene to mitigate the pressure on the exchange rate, although such measures have yet to be confirmed.
Recent data reveals that the naira has depreciated by approximately 70.5% year-on-year in the parallel market. In contrast, the NAFEM recorded a year-on-year depreciation of about 104%, with figures climbing from N755.27 per dollar in September 2023 to N1,540.78 per dollar in the same month this year.
Analysts attribute the currency's sustained depreciation to significant supply shortages, particularly in the foreign exchange market. Comments from the CBN Governor, Mr. Yemi Cardoso, indicate that there is a correlation between government disbursements and fluctuations in demand within the foreign exchange market. The central bank plans to closely monitor these allocations moving forward.
Compounding these issues, Finance Minister Wale Edun highlighted that Nigeria’s status as an oil-producing nation necessitates an increase in oil production to improve foreign exchange supply. This commentary suggests that inadequate supply, rather than demand pressure, is the root cause of the current forex market challenges.
Forex traders have noted that the demand for dollars has intensified as importers seek foreign currency amid limited availability. With predictions indicating that the dollar could reach N1,750 by the end of the month and potentially N1,800 by the end of 2024, concerns are mounting about the naira’s future stability.
