Emmanuel OchayiThe naira weakened further on Thursday at the official foreign exchange market due to a drop in dollar sales by market players.
The naira lost 10.45 percent of its value, with the dollar quoted at N1,484.75, weaker than N1,329.65 quoted on Wednesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from the FMDQ Securities Exchange Limited.
Join our WhatsApp ChannelThe dollar supply by willing sellers and buyers declined by 30.05 percent to $235.41 million on Thursday from $336.54 million recorded on Wednesday. This significant drop in dollar supply has put additional pressure on the naira.
An FX trader, John Okoye, commented, “The market is facing a serious dollar shortage. Many sellers are holding back, expecting higher rates in the future. This is causing the naira to weaken further.”
The summary of the FX auction revealed that the intraday high closed weaker at N1,520 per dollar on Thursday compared to N1,506 per dollar on Wednesday. The intraday low also depreciated to N1,100 on Thursday, weaker than the N1,010 exchanged on Wednesday.
READ ALSO: Naira Struggles At Official Market Amidst Marginal Dollar Supply Increase
In the parallel market, also known as the black market, the naira remained unchanged at N1,480 on Thursday. Despite various policies and interventions by the Central Bank of Nigeria (CBN), the local currency continues to depreciate.
Nigeria’s external reserves, which give the CBN the capacity to defend the naira, have declined by 7.21 percent over the past year, dropping to $32.763 billion as of May 22, 2024, compared to $35.31 billion as of April 20, 2023. This reduction in reserves adds to the challenges faced by the CBN in stabilizing the naira.
Economic analyst, Chika Okechukwu, explained, “The pressure on external reserves comes from high demand for foreign currency to pay for imported goods and services, low investment inflows due to weak investor confidence, and limited inflows from crude oil sales because of oil theft.”
The CBN has implemented several measures to manage the situation, including various interventions and policies aimed at stabilizing the naira. However, these efforts have yet to yield significant results. The continuous decline in external reserves and the high demand for dollars in the market continue to pose significant challenges.
Market participants and analysts are closely watching the developments. Many are hopeful that increased dollar supply or improved investor confidence could help stabilize the naira. However, without significant changes, the outlook for the naira remains uncertain.
As the situation develops, businesses and individuals are urged to stay informed and consider the potential impacts on their financial planning and operations. The CBN’s actions in the coming weeks will be crucial in determining the direction of the naira and the broader Nigerian economy.
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.
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