The exchange rate between the naira and the dollar closed at N1,537/$1 on Christmas Eve, gaining one naira from the previous day’s close of N1,538/$1.
This marks the official exchange rate entering Christmas at its lowest level in history, surpassing the N885.88/$1 exchange rate recorded on December 22, 2023, which was previously the worst in history.
The currency has therefore weakened by a staggering 42% over the past year, driven by several macroeconomic headwinds experienced throughout the year.
What the data is saying
Data from the Central Bank exchange rate portal shows that the naira closed at N1,537/$1 on Tuesday as businesses wrapped up earlier ahead of the Christmas celebration.
The intraday high and low recorded during the day were N1,545 and N1,533 to the dollar, respectively, compared to N1,545 and N1,532 recorded the previous day.
- Meanwhile, the NFEM rate for the day closed at N1,538.57/$1 compared to N1,535/$1 recorded a day earlier, while the simple average rate stood at N1,539/$1 compared to N1,537/$1 the previous day.
- The Central Bank has yet to begin publishing the volume of forex traded during the day.
- The exchange rate has appreciated by 8% month-to-date since the Central Bank introduced the new foreign exchange trading mechanism, EFEMS.
- On the parallel market, where the exchange rate is traded unofficially, the rate averaged between N1,650 and N1,655 to the dollar.
The parallel market rate has stabilized in recent days, following significant volatility earlier in the month when it exceeded N1,700 against the dollar.
The central bank recently granted Bureau de Change (BDC) operators temporary permission to purchase up to $25,000 weekly in foreign exchange (FX) from the Nigerian Foreign Exchange Market (NFEM).
Another directive was issued informing Nigerians looking to travel abroad that they can purchase dollars as personal or business travel allowances via their commercial banks.
Weakest day rate
The naira’s performance at the close of trading on the last working day before Christmas sets a new low in its history, reflecting the broader economic challenges Nigeria has faced in 2024.
- Despite the marginal improvement from the previous day’s rate, the closing rate of N1,537/$1 highlights a stark depreciation of 42% year-on-year, making it the weakest official exchange rate ever recorded for this period.
- The depreciation highlights the significant macroeconomic headwinds of the year, including persistent inflationary pressures, fiscal imbalances, and the challenges of landing on the right exchange rate policy following a move to a flexible rate.
- The CBN finally launched the new EFEMS trading mechanism which has helped introduce transparency into the currency market.
- While the new mechanism has seen some success in stabilizing rates month-to-date with an 8% appreciation, the broader picture reveals deep-seated structural issues within Nigeria’s foreign exchange market.
The parallel market, long considered a barometer for true demand and supply dynamics, continues to trade significantly higher, with rates stabilizing around N1,650–N1,655/$1.
This disparity between official and parallel market rates illustrates the ongoing inefficiencies and the urgent need for reforms to bridge the gap.
As Nigeria enters the festive season, the naira’s performance serves as a sobering reminder of the economic hurdles that must be addressed in the coming year to restore confidence in the currency and ensure a more sustainable exchange rate framework.