By Sodiq Adelakun
In a recent turn of events, the Nigerian Naira has taken a steep dive in the parallel market, hitting a new low against the Great Britain Pound (GBP).
As of the latest reports, the Naira has depreciated to N2050 per GBP, marking a significant 7.32 percent decline, or a drop of N150 from the previous day’s rate of N1,900.
The devaluation of the Naira continued into Tuesday morning, with black-market exchange rates reflecting the currency’s persistent struggle. By 11:54 am, the Naira had further weakened against the US dollar, with rates falling to N1,630/$1.
This represents a 1.84 percent decrease from the closing rate of N1,600 the day before.
These developments come despite the Central Bank of Nigeria’s (CBN) intensive efforts to stabilise the currency and improve the foreign exchange (forex) supply through a series of policy measures.
However, the forex market continues to face significant challenges, as evidenced by the Naira’s recent performance.
The CBN’s strategies have yet to curb the demand pressures that are undermining the Naira’s value, leading to concerns about the currency’s future stability.
Market analysts are closely monitoring the situation, as the parallel market often serves as a gauge for the real-world demand for forex among businesses and individuals who are unable to access foreign currency through official channels.
The continued depreciation of the Naira in the parallel market is a cause for concern among investors and the general public, as it impacts the cost of imports and contributes to inflationary pressures.
Additionally, the Naira weakened against the Euro by 0.57 percent, trading at N1750/EUR1 compared to N1740/EUR1 reported the previous day./
Market analysts attribute the recent decline to a consistent surge in demand for dollars that has been evident since the commencement of January. The primary contributors to this heightened demand include:/
A substantial portion of the demand is attributed to businesses actively seeking to restock goods or acquire raw materials, necessitating a higher demand for foreign exchange./
Individuals pursuing overseas studies have also played a significant role in driving the demand for dollars. This trend is likely connected to the need for tuition payments and related educational expenses./
The recent decline in the Naira’s value across official and parallel markets has prompted suggestions from financial experts to mitigate currency volatility and prevent further depreciation.
The CBN had announced a series of measures aimed at enhancing transparency and stability in the foreign exchange market while addressing malpractices.
Nevertheless, despite recognising the positive elements of the CBN’s recent policies to handle foreign exchange market pressures, analysts emphasise that these measures do not directly tackle the underlying problem of insufficient supply.