Emmanuel OchayiThe naira has been struggling against the dollar in recent months, reflecting the economic realities of the country. On Friday, March 14, 2025, the naira depreciated further, hitting N1,590 per dollar in the parallel market. This marked a new low for the currency, driven by a persistent shortage of dollars in the market. The fall in value is not only limited to the black market but also evident in the official Nigerian Foreign Exchange Market (NFEM), where the naira weakened to N1,547.81 per dollar, down from N1,538.68 on the previous day.
The depreciation of the naira is raising concerns among financial experts and market participants, as dollar shortages continue to shape the foreign exchange market. Bureau De Change (BDC) operators have noted that they are not receiving enough dollars from commercial banks, despite a directive from the Central Bank of Nigeria (CBN) allowing them to buy foreign exchange with a weekly cap of $25,000. The short supply has led to an increase in speculative activities, worsening the pressure on the naira. This has resulted in uncertainty about what lies ahead for the currency in the coming week.
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What Will Happen To The Naira This Week?
The trend observed last week suggests that the naira may continue to face pressure in the coming days. Market speculations indicate that the exchange rate could remain volatile due to the ongoing dollar scarcity. The gap between the official exchange rate and the black market rate continues to widen, raising concerns about the effectiveness of the current foreign exchange policies.
Financial experts believe that without a significant injection of foreign currency into the market, the naira could face further depreciation. The lack of confidence in the foreign exchange framework is driving more people to seek alternative ways of accessing dollars, leading to an increased demand in the parallel market. This demand could push the exchange rate higher, with projections suggesting that the naira may trade between N1,560 and N1,580 per dollar in the coming days.
Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria (ABCON), has expressed concern about the challenges faced by currency dealers. He said, “The BDCs are constrained on availability, unfavourable offer rates, limited participating banks, lower margins, and business uncertainties.” According to him, these factors have created a loss of confidence in the supply framework, leading to an increase in speculative activities that further weaken the Naira.
Dr. Ngozi Ebube, an economist, has also weighed in on the situation, stating, “The persistent dollar shortages and policy inconsistencies are eroding investor confidence.” She emphasised that without a clear and stable policy direction, the foreign exchange market will continue to experience instability, making it difficult to predict any significant recovery for the naira.
Adedayo Bisi, a financial expert, explained the issue further, saying, “The naira’s depreciation is a reflection of underlying structural challenges in the economy.” He noted that unless there is a fundamental change in the approach to foreign exchange management, the currency will remain vulnerable to fluctuations, making it difficult for businesses and investors to plan effectively.
What Is Driving The Fall Of The Naira?
The naira’s depreciation is largely due to limited dollar liquidity in the market. The CBN’s recent policies aimed at stabilising the foreign exchange market have not yielded the expected results, as commercial banks struggle to supply enough dollars to meet demand. This shortage has created a cycle where importers, businesses, and individuals are forced to turn to the parallel market for foreign exchange, further increasing the pressure on the Naira.
Market speculation is also playing a major role in the currency’s decline. Many traders and investors are anticipating further depreciation, leading to a rush to buy dollars in advance, thereby driving up demand. The uncertainty surrounding foreign exchange policies has added to this speculation, as many stakeholders are unsure about the government’s next steps.
Will The Naira Recover Soon?
The outlook for the naira remains uncertain, as it is heavily dependent on the country’s ability to attract foreign investment and boost dollar supply. The government’s response in the coming weeks will be critical in determining the currency’s performance. If the CBN can introduce measures that improve liquidity and restore confidence in the market, there may be a chance for stabilisation. However, if the current situation persists, the naira could face further losses.
For now, businesses and individuals who rely on foreign exchange should prepare for continued fluctuations. The coming week will be crucial in determining whether the naira stabilises or experiences another round of depreciation. The government and financial authorities will need to act swiftly to address the fundamental issues affecting the foreign exchange market to prevent further instability.
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.
