The exchange rate between the Naira and Dollar on the official NAFEM window fell to a week to date low of N1,234.49/$1 on Monday, 22nd of April, 2024.
This is according to data from the FMDQ where the exchange rate is traded officially and end of day posts quoted.
This is a sharp depreciation from the official exchange rate N1,169.99/$1 recorded on Friday 19th of April 2024. Nairametrics had reported, Friday’s closing rate was also a 6-day low.
The exchange rate strengthened to around N1,072.74 on Wednesday as traders projected the local currency could trade below N1,000/$1 for the first time.
However, the latest drop appear to coincide with the remarks of the apex bank Governor, Yemi Cardoso, who stated that the intent of the bank was not to defend the Naira, when asked about the sudden drop in external reserves.
What the data is saying
Data from the FMDQ for the 22nd of April 2024 indicate the exchange rate closed at N1,234.49/$ representing a 5.22% decline in one day.
- Meanwhile, the intra-day high and lows recorded on April 22nd were N1,295/$1 and N1,050/$1 respectively compared to N1,236/$1 and N1,021/$1 on Friday.
- Total forex turnover recorded on the day was also $110.17 million compared to $86.68 million recorded same period on Friday.
- Meanwhile the FMDQ also states that the NAFEX rate is N1,173.72/$1 dated April 19, 2024.
Optics
The sudden downturn comes after a period of notable appreciation, where the Naira was briefly touted as the best-performing currency globally, bolstered by the Central Bank of Nigeria’s (CBN) foreign exchange reforms and strategic economic policies.
- Just last Wednesday, the exchange rate had strengthened impressively to around N1,072.74, with market traders projecting that it might even breach the N1,000/$1 mark.
- The fluctuation in the exchange rate has been significant, with the Naira experiencing both record highs and lows within a short span.
- On April 22, the intra-day trading saw the Naira swing from a high of N1,295/$1 to a low of N1,050/$1.
- These drastic shifts highlight the ongoing volatility in the foreign exchange market, despite the CBN’s efforts to stabilize the currency through policy adjustments.
Impact of CBN’s Stance on Market Sentiments
The recent depreciation seems to align with statements from CBN Governor Yemi Cardoso, who recently emphasized that the central bank’s current strategy is not to defend the Naira at any cost.
- Governor Cardoso’s remarks came in response to inquiries about the sharp decline in Nigeria’s external reserves, which appears to have influenced market sentiments and trader behaviors negatively.
- This rise in forex activity could be indicative of heightened trading volatility and possible speculative trading, as market participants react to the central bank’s signals and global economic cues.
