Emmanuel OchayiThe Nigerian Naira depreciated further in the parallel market on Friday, closing at N1,500 per dollar as foreign exchange (FX) scarcity continues to pressure the local currency. The exchange rate fluctuated throughout the week, reflecting persistent volatility in the forex market.
Market data shows that the Naira started the week at N1,500 per dollar, dropped to N1,480 midweek, and climbed back to N1,500 by Friday. On Thursday, the exchange rate stood at N1,495 per dollar, meaning the Naira lost value again before the market closed.
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Why the Naira is Falling
Market analysts attribute the decline of the Naira to multiple factors, including rising demand for dollars, dwindling foreign reserves, and speculative trading activities. Businesses and individuals seeking to meet financial obligations are struggling to access dollars, increasing pressure on the parallel market.
In the official market, data from the Central Bank of Nigeria (CBN) showed the Naira closing at N1,496 per dollar on Thursday, slightly weaker than Wednesday’s rate of N1,495 per dollar. These fluctuations highlight ongoing supply and demand pressures on the local currency.
Foreign Reserves and Currency Trends
Nigeria’s foreign reserves have also declined, further straining the country’s ability to stabilize the forex market. Data from the CBN indicates that reserves dropped by $41.57 million between Monday and Wednesday.
Other major foreign currencies experienced fluctuations as well. The British pound traded between N1,900 and N1,950, while the euro remained stable around N1,550 in the parallel market.
Market Reactions and Future Outlook
Financial experts believe that the Naira’s decline is primarily due to:
- Increased dollar demand from businesses and importers.
- Declining foreign reserves, reducing the CBN’s ability to intervene in the forex market.
- Speculative trading, as traders seek to profit from exchange rate fluctuations.
Analysts suggest that stabilizing the Naira will require improved dollar liquidity, investor confidence, and strong policy interventions. However, economic uncertainties continue to fuel exchange rate volatility.
Calls for Stronger Policy Measures
Some financial experts argue that stabilizing the Naira should be a priority for policymakers rather than focusing on interest rate adjustments.
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Samson Esemuede, Chief Investment Officer at Zrosk Investment Management Ltd, emphasized the need for exchange rate stability. His comments came after the recent Monetary Policy Committee (MPC) meeting, where the CBN retained the benchmark Monetary Policy Rate (MPR) at 27.50%.
Additionally, Bismarck Rewane, CEO of Financial Derivatives Company, revealed that the Federal Government has spent approximately $8 billion in efforts to stabilize the Naira. Despite this intervention, the local currency remains under pressure.
Uncertain Outlook for the Naira
With ongoing forex scarcity and economic challenges, the future of the Naira remains uncertain. Experts warn that without sustained policy measures, the local currency may continue to struggle against the dollar. While the government and CBN explore solutions, market participants remain cautious about the Naira’s direction in the coming weeks.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
