On Tuesday, the Nigerian naira experienced a significant depreciation, falling to N1089.51/$ on the official Investor and Exporter window. This marks a 27.19% decline from the N856.57/$ recorded on the previous day. The naira opened at N922.22/$, reaching a high of N1251/$ and a low of N720/$ before closing at N1089.51/$. This is the fourth time the naira has closed below N1,000 on the official window, with the previous occurrences on December 8, 2023, December 28, 2023, and January 3, 2024. Despite efforts by the Central Bank of Nigeria (CBN) to clear forex obligations, the naira continues to face challenges, and its decline is noted even after the removal of the rate cap.
The CBN has paid $2bn as part of its backlog obligations, with an estimated remaining obligation of $7bn in forward contracts. The volatility is attributed to inadequate forex supply, and experts emphasize the need for increased efforts to attract foreign exchange inflows to stabilize the naira and improve economic conditions.
Context:
- The naira’s continued decline is in the face of the government’s efforts to boost liquidity in the forex market.
- The CBN has disclosed that it has disbursed $61.64m to foreign airlines as part of matured forex owed to them, aiming to alleviate pressure on the country’s exchange rate.
- The Minister of Finance, Wale Edun, announced that the Federal Government received a $2.25bn forex support facility from the African Import-Export Bank to address FX shortages.
Expert Insights:
- Dr. Ayo Teriba, CEO of Economic Associates, highlighted the volatility of the naira due to inadequate forex supply and emphasized the need for the government to attract foreign exchange inflows to stabilize the currency.
- Teriba expressed optimism about potential solutions, including opening up to investors and fast-tracking initiatives like taking the Nigerian National Petroleum Corporation (NNPC) to the market.
- He emphasized the importance of building sufficient forex reserves to improve the FX market, stabilize the naira, lower inflation, and drive economic growth.
The challenges underscore the importance of addressing forex supply issues and implementing measures to enhance economic stability.