Money market
Naira plunges to record low of N960, as Dollar demand surges at black market
By Sodiq Adelakun
In a concerning development for Nigeria’s economy, the naira, the country’s currency, weakened to an all-time low of N960 against the dollar on Monday.
This represents a 0.52 per cent loss compared to the N955 per dollar traded on Friday. The depreciation comes despite the recent appointment of Olayemi Michael Cardoso as the new Governor of the Central Bank of Nigeria (CBN) by President Bola Tinubu.
The parallel market, commonly known as the black market, experienced strong demand for dollars, leading to the decline in the value of the naira.
This situation highlights the challenges faced by the new CBN Governor in stabilising the currency and restoring confidence in the Nigerian economy.
While the naira struggled at the parallel market, there was a different trend at the Investors’ and Exporters’ (I&E) forex window, Nigeria’s official foreign exchange market.
Here, the naira strengthened by 2.96 per cent, with the dollar quoted at N756.91 on Friday. This was a slight improvement compared to N780.00 on Thursday, but weaker than N758.12 on Wednesday and N742.10/$1 mentioned on Tuesday, according to data from the FMDQ.
The decline in the dairy foreign exchange (FX) market turnover further adds to the concerns. On Friday, the turnover decreased by 34.21 per cent to $45.88 million from $69.74 million recorded on Thursday. This decline reflects the cautious approach of investors and businesses in the face of the unstable currency situation.
As the new CBN Governor takes charge, stabilising the exchange rate, controlling inflation, and maintaining single-digit interest rates are expected to be his topmost priorities.
A consulting firm, PwC, has projected a marginal decline in Nigeria’s inflation to 29.5 percent by the end of this year.
The company made the projection in its latest economic outlook report on Nigeria released on Monday. According to the company, the decline would be achieved as a result of the ongoing reforms and policy actions of the government.
As of May, data from the National Bureau of Statistics (NBS) shows Nigeria’s inflation rate surged to 33.95 percent in May 2024, up from 33.69 percent in April 2024.
“PwC projects a marginal decline in inflation to 29.5 percent by year-end, balancing the effects of reforms, policy actions, external pressures, and food prices; particularly in the second half of the prices outlook year,” the company stated.
Despite the positive projection, the company highlighted key considerations for the government in the areas of policies that could help stabilise the economy.
Specifically, it urged the government to prioritise macro stability by addressing security, social and pressure points of inflation, and exchange rate pressures.
According to PwC, the government would also need to mobilise capital to drive growth through market focused policies, intensification of investment promotion. It also advised the government to make short- and long-term sectoral bets focused on exports, domestic substitution, and job creation.
“Government must drive fiscal prudence by optimising spending on capital projects with the highest ROI, rationalise public service spending and improve revenue diversification and collection efficiency. It must decide when and how to introduce, defer, sequence, or stagger different policies based on current economic and social conditions,” the firm added.
Citing the recently introduced and suspended cybersecurity levy as an instance, PwC advised the government to adopt scenario planning before any major economic reform is implemented to avoid unwarranted policy reversals.
The Federal Government has unveiled a central revenue system aimed at enhancing financial transparency, accountability and prudent revenue management.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun is the Chair of the stakeholder engagement meeting on the Implementation of the Revenue Assurance and Central Disbursement Solutions for Federal Government Ministries, Departments and Agencies (MDAS) as well as FG-Owned Enterprises in Abuja.
Director, Information and Public Relations, Mohammed Manga in a statement on Monday, said the central revenue system is deployed to enhance financial transparency and accountability in direct payments to beneficiaries and direct deduction of what is due to the Federal Government.
According to Manga, once implemented, the Government Integrated Financial Management Information System (GIFMIS) and non-GIFMIS platforms will monitor revenue generation and provide a consolidated dashboard of the revenue situation for all Federal Government-owned enterprises.
Key stakeholders, including the special adviser to the president on energy, the special adviser on ICT, the Central Bank of Nigeria (CBN), the office of the accountant-general of the federation, and the Nigeria Inter-Bank Settlement System participated in the meeting.
The naira slumped marginally against the United States dollar on Friday. Data from the Nigerian Autonomous Foreign Exchange Market (NAFEM) showed that the domestic currency traded at N1, 485.53/$1 on Friday.
At the end of trading today, the naira lost less than N1 against the dollar as against the N1,485.36/$1 it recorded on Thursday.
The intra-day high and low recorded during the day were N1, 505/$1 and N1, 401/$1 respectively, representing a very lean spread of N104\$1.
Similarly, the naira slumped against the dollar at the parallel section of the market to trade at N1,495/$1, as against the N1,490/$1 it traded the previous trading day.
However, the Nigerian currency appreciated slightly against the British Pound to trade at N1,890\£1 s against the previous trading day’s N1,900\£1. For several weeks consecutively, the Canadian dollar closed flat against the naira to trade at N1,200| CA$1.
The naira also lost N10 against the Euro to trade at N1,590/€1 as against the previous trading day’s N1,580/€1.
