Black market: Naira plummets to N1,410/$1
By Sodiq Adelakun
The Nigerian Naira hit a new record low on Thursday, reaching N1,410 per dollar on the parallel market, commonly known as the black market.
This represents a 3.29 percent decrease compared to the previous day’s closing rate of N1,365. The depreciation of the Naira is unprecedented and marks the lowest point in its history, highlighting the severity of the current economic challenges faced by Nigeria.
Market analysts attribute this recent decline to a consistent increase in the demand for dollars, which has been noticeable since the beginning of January. Several factors contribute to this heightened demand.
Firstly, businesses are actively seeking to restock goods or acquire raw materials, leading to a higher demand for foreign exchange.
Secondly, individuals pursuing overseas studies have also played a significant role in driving the demand for dollars. This trend is likely due to the need for tuition payments and other related educational expenses.
The continuous surge in demand for dollars has put significant pressure on the Naira, resulting in its record low value. This situation highlights the urgent need for the Nigerian government to address the economic challenges and implement measures to stabilize the currency.
The departure of diaspora Nigerians, particularly noticeable after the holiday season, has contributed to the increased demand for foreign currency. The departure of individuals from the US and other foreign countries has had a notable impact on the parallel market.
With schools abroad reopening, international students are actively restocking their foreign currency reserves to meet impending school fees and other financial obligations. Additionally, students are securing funds for holiday allowances.
The unprecedented depreciation marks the lowest point in the naira’s history against the US dollar, raising concerns about potential economic ramifications.
It was gathered that forex turnover/ dropped by 3.18 percent/ to $56.60/ as/ the Nigerian naira tumbled against the dollar marginally on Wednesday, January 24th, 2024, in both the official and black markets.
The domestic currency depreciated 0.41 percent to close at N882.24 to a dollar at the close of business, based on data from NAFEM where forex is officially traded.
This represents an N3.63 loss or a 0.41 percent decrease in the local currency compared to the N882.24 it closed at on the previous day.
The intraday high recorded was N1313/$1, while the intraday low was N700/$1, representing a wide spread of N613/$1.
According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $56.60 million, representing a 3.18 percent decrease compared to the previous day.
Similarly, the naira depreciated at the parallel forex market where forex is sold unofficially, the exchange rate quoted at N1365/$1, representing a 0.37 percent decrease over what it closed the previous day, while peer-to-peer traders quoted around N1399.12/$1.
Recall that the Governor of the Central Bank of Nigeria, Yemi Cardoso, has stated that the naira is undervalued and that the bank will work towards real price discovery in the foreign exchange market by 2024.
He also promised to implement inflation-taming policies and collaborate with the Ministry of Finance to increase foreign exchange reserves. Cardoso noted that the anticipated resumption of operations in the country’s refineries will contribute to a reduction in pump prices of PMS, a major contributor to the CPI basket.
The inflation outlook is geared towards increasing economic growth and a more predictive cost environment, with inflation expected to decline in 2024 due to the CBN’s inflation-targeting policy.
The naira traded at N878.61 on the official market according to FX monitor yesterday but recorded N1360/$1 on the unofficial market.
On increasing the FX reserves, Mr Cardoso stated that the bank’s partnership with the Ministry of Finance and NNPC Ltd ensures all foreign exchange inflow is returned to the bank as it will result in the accretion of the country’s foreign reserve.
The Governor also noted that the anticipated resumption of operations in the three refineries across the country will contribute to a reduction in the pump prices of PMS which is a major contributor to the CPI basket.
He also noted that the inflation outlook is geared towards increasing economic growth and a more predictive cost environment.
He stated, “Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4 percent.
“The outlook for decreasing inflation in 2024 will have a profound impact on businesses, providing a more predictable cost environment and potentially leading to lower policy rates, stimulating investment, fueling growth, and creating job opportunities,”
