The Nigerian naira weakened by 0.12% against the US dollar in the parallel market, on October 25, 2024, trading at N1,730/$1—a marginal decline of N2 from the previous rate of N1,728.
This marks the second consecutive day of depreciation after a 0.58% appreciation on October 23, when the naira traded at N1,725/$1.
Meanwhile, the naira reversed a three-day depreciation streak in the Investors and Exporters (I&E) window, closing at N1,601.20/$1—a 3.30% improvement from the prior close of N1,654.09.
Since October 15, the naira has consistently traded above the N1,600 threshold in this official market.
The gap between the parallel market rate and the official rate widened to N128.80, up from the previous day’s difference of N73.91. Additionally, data from NAFEM showed a 69% surge in forex transactions, totaling $230.99 million compared to $136.68 million previously.
The CBN’s external reserves rose by 0.188% to $39.230 billion on October 22, 2024, up from the prior level of $39.156 billion, marking the ninth consecutive day of growth.
Under recent Central Bank of Nigeria (CBN) policies, including rate hikes aimed at curbing inflation and stabilizing the economy, the domestic currency is displaying signs of stability. The CBN has also cleared backlogs of foreign exchange obligations, including payments to airlines.
Market Trends
The naira has faced sustained depreciation throughout 2024, losing over 50% of its value since the start of the year in the official market. Back in January, the currency traded at N838.95/$1, and breached the N1,500/$1 mark in February, after a brief rally in March saw it recover to N1,300.43/$1 to reach a record low of N1,660.5/$1 in October.
In the parallel market, the naira started the year at N1215 per dollar and continued the rally until it reached an all-time low of N1,880 for the first time in February. The naira afterwards recovered to N1,110 in April, and continued its downward trajectory to its recent drop into the N1,700 threshold to date.
Key data points
- On October 24, 2024, the naira traded as high as N1,696 per dollar and as low as N1,585.43/$1, reflecting a disparity of N110.57 before settling at N1,601.20 in the I&E window.
- By October 25, 2024, the naira traded at N1,730 per dollar in the parallel market, marking a slight 0.12% decline from the previous rate of N1,728.
- In the I&E window, the currency closed at N1,601.20/$1, showing a 3.30% improvement from the prior close of N1,654.09.
- Trading volumes in the I&E window also surged, reaching $230.99 million compared to $136.68 million the day before, highlighting increased market activity and dollar demand.
Key factors at play
During a press briefing at the ongoing World Bank/IMF meetings, the newly launched Global Financial Stability Report highlighted signs of stability in the Nigerian naira, attributed to recent policies by the Central Bank of Nigeria (CBN).
The IMF noted that the naira’s steadiness is influenced by the CBN’s recent actions, including clearing the foreign exchange backlog and raising interest rates.
The report also stated that these policy measures by local authorities have led to encouraging developments, with the rate hikes and the clearance of overdue foreign exchange obligations contributing to the naira’s improved stability.
What to expect
With the naira recently breaching the N1,700/$1 mark, there is potential for a short-term recovery.
- Global oil prices have now stabilized between $79 and $81 per barrel, and the Central Bank of Nigeria’s (CBN) consistent interventions may help ease some inflationary pressures, fostering a more positive outlook for the naira. Additionally, new policies aimed at reducing foreign exchange demand could further support the currency, potentially bringing it back into the N1,600/$1 range in the near term.
- Notably, the official exchange rate closed at N1,601.20 on October 25, following the CBN’s $60 million intervention in the official market on October 17, when dollars were sold to deposit banks at N1,540.
Nevertheless, the naira’s trajectory will remain closely tied to broader macroeconomic factors, including inflationary pressures and foreign currency supply. As Nigeria addresses these challenges, the effectiveness of policy responses will be key in determining whether the naira stabilizes or faces further depreciation.
