The dollar to naira exchange rate has crashed on the Central Bank of Nigeria (CBN) official window, plummeting to N1,640 on Tuesday from N1,610.50 traded on Monday.
This significant drop highlights the mounting pressure on the naira, exacerbated by a scarcity of U.S. dollars in the parallel market, also known as the black market.
This latest exchange rate represents a 44% loss year-on-year and reflects a daily loss of N5, as the naira continues its downward spiral from N1,635 quoted on Monday, September 2, 2024, and N918 on the same date last year. Street traders and online platforms tracking rates in the unregulated market confirmed the growing difficulty in accessing dollars.
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“There is scarcity of dollars in the market,” one street trader noted, underlining the ongoing challenges in the currency market. Despite the naira’s brief gain on Monday, when it appreciated by 0.81% or N12.79 to close at N1,585.77, the overall trend has been one of consistent depreciation due to the limited supply of dollars.
On Monday, the dollar supply from willing buyers and sellers in the Nigerian Autonomous Foreign Exchange Market (NAFEM) dropped to its lowest level in 18 trading days, declining by 58.81% to $71.18 million from $172.80 million recorded the previous Friday.
Market data also revealed that the naira’s intraday high closed at N1,619 on Monday, up slightly from N1,610.50 on Friday, while the intraday low dropped to N1,500 from N1,511 during the same period.
Last week, the naira depreciated by 1.78% against the U.S. dollar, ending at N1,598.56/$1 at the NAFEM window, according to a report by Coronation Asset Management. This decline brought its year-to-date depreciation to 43.25%, up from 42.23% the previous week. In the parallel market, the naira also weakened by 1.22%, closing the week at N1,640/$1.
Despite total inflows of $403.00 million through the NAFEM window, primarily driven by non-bank corporates and the exporters/importers window, these inflows have been insufficient to meet the rising demand for U.S. dollars, contributing to the continued depreciation of the naira.
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Additionally, the Central Bank of Nigeria (CBN) reported a slight decline in the country’s gross foreign exchange reserves, which fell by 0.32%, or $116.04 million, to $36.32 billion by the end of the week. This marks the fourth consecutive week of decline, attributed to the CBN’s ongoing interventions in the foreign exchange market.
The persistent dollar scarcity and the naira’s depreciation pose significant challenges to Nigeria’s economy, impacting inflation, investment, and overall economic stability.
