Naira on Wednesday fell to a record low of N1,320 per dollar following strong demand on the parallel market, also known as the black market.
This represents 3.03% or N40.00 weaker than N1,280 recorded at the close of trading on Tuesday.
This depreciation marks the lowest the Naira has come to since October 26, 2023, when it reached N1,300 against the dollar on the parallel market.
Why the depreciation
Market analysts attribute the recent decline to a steady rise in demand for dollars since the beginning of January.
- This demand is primarily driven by businesses seeking to restock goods or raw materials and individuals requiring dollars for overseas studies.
- Nairametrics also understands this is connected to diaspora Nigerians who are now departing in droves after the holiday season.
- Another reason is also due to the reopening of schools abroad as international students restock to pay school fees and hold some cash for holiday allowances.
Nairametrics reported that forex turnover rose by 460.52% to $147.81 as the Nigerian naira tumbled against the dollar on Tuesday, January 16th, 2024, in the official markets.
The domestic currency depreciated 4.72% to close at N878.57 to a dollar at the close of business, based on data from NAFEM where forex is officially traded.
- This represents an N39.62 loss or a 4.72% decrease in the local currency compared to the N838.95 closed the previous day.
- The intraday high recorded was N1299.50/$1, while the intraday low was N720.50/$1, representing a wide spread of N579/$1.
- According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $147.81 million, representing a 460.52% increase compared to the previous day.
What financial experts are saying
The former President and Chairman Governing council of, the Chartered Institute of Stockbrokers (CIS) and the Managing Director, of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe in an exclusive chat with Nairametrics said for the exchange rate to be stable, market and participants confidence is key.
- “Confidence is what makes foreigners want to come to invest in your country and make locals want to keep their investments here.
- “In the absence of these dynamics, demand will naturally outstrip supply and you see the sort of instability we are experiencing now.
- “I think the decision to clear FX commitment backs will be positive for market confidence, but the desired impact might manifest in the medium term rather than in the short run.
- “I also think the efforts at using monetary policy tools to reduce system liquidity could ultimately reduce currency speculation but again it’s not a silver bullet.
- “Deliberate efforts need to intensify at effecting structural changes that will encourage import substitution such as improved security, better infrastructure increased foreign direct investments, and encouraging local production,” he said.