The naira has suffered further depreciation on the Nigerian Autonomous Foreign Exchange Market (NAFEM) window, closing at N1,603.80/$1 on Thursday, July 25, 2024.
According to data from the FMDQ Securities Exchange, the naira depreciated by 1.07% from N1,586.71/$1 recorded the previous day.
It is also the lowest level since March 14, 2024, when it was N1,608.98/$1, as the naira breaks through the N1,600 ceiling.
The local currency traded at a high of N1,620/$1 and a low of N1,519/$1 on Thursday, amid demand pressure.
This crash comes barely three days after the naira posted impressive gains against the dollar, recording its best gains since March.
Declining FX turnover
Nairametrics further observed that there was a decline in foreign exchange (FX) turnover by 23.35% from $171.03 million to $131.09 million on Thursday.
This decline occurred despite the assurance by the Central Bank last week that “Over the next few weeks, the CBN will continue to support various segments of the official markets with liquidity.”
The assurance was contained in a statement from the apex bank, announcing the sale of $106.5 million as forex to 29 FX dealer banks.
That was the second time the CBN made FX sales to authorized dealers this month as the naira struggles with demand pressure.
In an attempt to stabilize the foreign exchange market, the apex bank sold $122.67 million to 46 authorized dealers about two weeks ago.
The CBN has also announced the approval of the sales of FX to eligible BDCs to meet the demand for invisible transactions in a decisive step to strengthen the naira on Thursday, July 18, 2024.
The bank announced that the sum of $20,000 is to be sold to each BDC at the rate of N1,450/$1. This rate represents the lower band of the trading rate at the NAFEM from the previous trading day.
Despite the efforts of the CBN to stabilize the local currency, the naira has faced severe depreciation this month.
The CBN earlier attributed recent foreign exchange market movements to corporate demand pressure and the seasonal summer uptick.
Nairametrics also reported that the bullish dollar index and summer vacation have led to a considerable increase in demand for foreign currencies, putting significant pressure on the naira.
What you should know
- The Governor of the Central Bank, Yemi Cardoso, recently claimed that the country has already experienced the worst of naira volatility regarding foreign exchange.
- During an interview in London with Bloomberg TV, Cardoso said he is satisfied with how far they have been able to manage the currency crisis in the past few months.
- Regarding whether the naira has reached its peak value or if further appreciation is expected, the CBN chief stated that it depends on “a host of different issues,” implying that the fiscal side plays a significant role in determining the value of the currency.
- Cardoso, however, added that it is a work in progress as they will continue to implement certain macroeconomic fundamentals that will positively impact the market.
- Financial analysts at United Capital Plc earlier forecasted that the exchange rate will stabilize, trending between N1,423.26/$ and N1,550/$ by the end of 2024.
