The Nigerian naira experienced a significant setback in trading, concluding at N1035.12/$ on the official Investor and Exporter (I&E) foreign exchange window this Wednesday. This marks a 4.72% decline from Tuesday’s closing rate of N988.46/$, as reported by data from the FMDQ Securities Exchange.
Details: In the initial two trading days of the year, the national currency faced a notable decline, with Wednesday’s closure being the third instance since the removal of the rate cap by the Central Bank of Nigeria that the naira closed above N1,000/$.
Trading commenced on Wednesday at N932.67/$, reaching an intraday high of N1,224/$ and a low of N700/$. The total forex turnover for the day amounted to $85.68 million.
This decline in the naira’s value contradicts the recent $2.25 billion foreign exchange support facility from the African Import-Export Bank, received by the Federal Government. Wale Edun, the Minister of Finance and Coordinating Minister for the Economy, explained that the initial tranche of the $3.3 billion facility is intended to address the FX shortages in the economy.
Despite this financial assistance, the naira continues to struggle, retaining its position as one of the poorest-performing currencies. Bloomberg had previously noted the currency’s dismal performance in 2023, and concerns persist into 2024.
In the December Nigeria Development Update by the World Bank, it was highlighted that the naira has depreciated against the US dollar by 41% in the official market and 30% in the parallel market. The report emphasized the necessity for increased FX volume to achieve stability in the official market.
The World Bank suggested, “Further monetary policy tightening is expected to help underpin the value of the naira. However, there is also a need to increase FX supply in the market.” It recommended facilitating FX flows, particularly from all exports, through the NAFEM to provide additional volumes in the official window for enhanced stability.
Additionally, the report stressed the importance of clarity on the Central Bank of Nigeria’s net reserve position and its progress in clearing the FX backlog to strengthen market confidence.