The naira has continued its slide against the dollar, depreciating further at both the official and parallel foreign exchange markets. According to FMDQ data, the naira weakened to N1,689.88 per dollar on Wednesday, down from N1,681.42 recorded on Tuesday, reflecting a depreciation of N8.42.
Naira Weakens Further in Black Market
The naira also declined at the black market, where it lost N5, closing at N1,740 per dollar on Wednesday, compared to N1,735 on Tuesday. The ongoing depreciation highlights persistent pressure on the local currency amid limited foreign exchange supply.
FX Supply Turnover Drops Sharply
In a related development, foreign exchange (FX) transaction turnover experienced a significant drop. On Wednesday, FX supply turnover fell to $106.44 million, a sharp decline from the $471.5 million reported the previous day. This reduction in dollar supply has exacerbated the naira’s decline, further straining the local currency market.
Naira’s Outlook Worsens
The depreciation trend comes on the heels of a recent projection by BMI, a subsidiary of Fitch Solutions, which warned that the naira could weaken further to N1,993 per dollar in the coming days. The forecast adds to concerns about the naira’s stability and the broader economic implications for Nigeria.
Rising Reserves Offer Little Relief
Interestingly, the naira’s depreciation persists despite a rise in Nigeria’s foreign exchange reserves. As of November 11, 2024, the Central Bank of Nigeria (CBN) reported an increase in reserves to $40.167 billion. However, this boost in reserves has yet to translate into relief for the naira, as demand for dollars continues to outstrip supply.
What’s Next for the Naira?
Market analysts suggest that without a significant intervention or improvement in dollar supply, the naira may continue its downward trend. The pressure on the local currency reflects ongoing economic challenges, including rising inflation and reduced foreign investments, which have limited the availability of foreign exchange.
The currency’s continued depreciation raises concerns for businesses and consumers alike, as a weaker naira may lead to increased import costs and further inflationary pressures.
