Naira depreciates against US Dollar, as FX market liquidity declines

By Sodiq Adelakun

The Nigerian currency experienced a depreciation against the US dollar on Monday due to a decrease in liquidity in the foreign exchange market.

At the close of trading, the dollar was quoted at N778.80, compared to N764.86 on Friday at the Investors’ and Exporters’ forex window, which is Nigeria’s official foreign exchange market.

Data from the FMDQ revealed that the daily turnover in the foreign exchange market, which indicates the level of liquidity or transactions, dropped by 18.72 percent to $43.09 billion on Monday from $53.02 billion on Friday.

The local currency remained steady at N1,049 per dollar since Friday at the parallel market, also known as black market.

As part of its responsibility to ensure price stability, the Central Bank of Nigeria (CBN) said it will boost liquidity in the Nigerian foreign exchange market by interventions from time to time.

“As market liquidity improves, these CBN interventions will gradually decrease,” the CBN said.

Nigeria’s Central Bank said it will continue to promote orderliness and professional conduct by all participants in the Nigerian foreign exchange market to ensure market forces determine exchange rates on a Willing Buyer – Willing Seller principle.

The CBN has reiterated that the prevailing FX rates should be referenced from platforms such as the CBN website, FMDQ, and other recognised or appointed trading systems to promote price discovery, transparency, and credibility in the FX rates.