The naira had a turbulent trading week as the exchange rate to the dollar experienced sharp fluctuations in both official and parallel markets.
By the week ending December 13, 2024, the official exchange rate closed at N1,540/$1, marking a slight depreciation of 0.35% compared to N1,535/$1 recorded a week earlier, according to the Central Bank of Nigeria’s (CBN) currency tracker.
In the parallel market, the naira ended the week trading at an average of around N1,660/$1, according to Nairametrics’ market sources, rebounding from earlier lows of N1,750/$1 during intra-week volatility.
Some traders quoted higher while others also quoted lower
Midweek gains offset by late weakness
The CBN data revealed that the naira started the week stronger at N1,535/$1, gaining value to reach N1,525/$1 early in the week.
- However, this momentum was short-lived as the currency depreciated sharply to N1,545/$1 midweek before slightly recovering to close at N1,540/$1.
- Intra-day volatility was also notable, with trading highs reaching N1,560/$1 and lows touching N1,500/$1.
- The Volume Weighted Average rate for the week was N1,533.2/$1, while the Simple Average closing rate stood at N1,534/$1, reflecting ongoing pressure on the local currency despite some signs of recovery.
The parallel market, often seen as a barometer for the currency’s real demand, experienced even greater swings during the week.
- Nairametrics’ sources reported that the naira fell to a record low of N1,750/$1 in the black market before staging a late-week recovery to N1,660/$1.
- Some other platforms checked by Nairametrics also quoted around N1,680/$1.
- The recovery has been attributed to increased dollar inflows from exporters and remittances, as well as interventions by key players in the market.
- The wide gap between the official and parallel rates remains a concern, with market participants noting that speculative activity continues to drive much of the volatility in the parallel market.
Despite the gyrations in exchange rates, the CBN has yet to release official trading turnover figures for the week, leaving market observers with limited insight into the scale of dollar supply in the official market.
Analysts speculate that dollar liquidity remains constrained as businesses and individuals scramble to secure foreign exchange amid high demand.
The absence of turnover data adds to the uncertainty surrounding the currency markets and raises questions about the central bank’s ability to maintain stability.
What you should know
Some BDC operators who spoke to Nairametrics earlier in the week opined the weakening was likely the handiwork of speculators who are holding strong despite the introduction of a more robust trading platform by the CBN.
- Nairametrics had earlier reported that the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadebe, had warned that forex speculators will resist the rapid appreciation of the naira to cover their losses.
- Gwadebe had urged the CBN to keep the momentum, discourage the illegal act of speculation and currency substitution as well as engage the BDC operators where volatility is pervasive.
The comments by Gwadebe followed the significant strengthening of the naira at both the official and parallel markets after days of appreciation since the apex bank introduced the EFEMS platform.
