The Nigerian naira has experienced a significant depreciation, losing 26.36% of its value against the US dollar at the official Investor and Exporter window of the foreign exchange market. This comes despite the Central Bank of Nigeria (CBN) announcing the clearance of $2 billion as part of its backlog obligations.
The CBN, in a bid to alleviate pressure on the country’s exchange rate, revealed on Monday that it had disbursed $61.64 million to foreign airlines as part of matured foreign exchange obligations. Acting Director of Corporate Communications, Hakama Sidi Alia, emphasized that these payments aimed to settle all remaining valid forward transactions.
However, since the announcement, the naira has traded above ₦1000 against the dollar, closing at ₦1082.32/$ on Wednesday, according to data from the FMDQ Securities Exchange. This marks a 0.66% increase from Tuesday’s closing rate of ₦1089.51/$.
Despite renewed efforts to boost liquidity in the foreign exchange market, including a $2.25 billion foreign exchange support facility received by the Federal Government from the African Import-Export Bank, the naira’s volatility persists. Dr. Ayo Teriba, CEO of Economic Associates, attributes the naira’s decline to inadequate foreign exchange supply, emphasizing that government efforts to attract investments must materialize to address the shortage.
Prof. Adeola Adenikinju, President of the Nigerian Economic Society, anticipates increased stability in 2024. He cites factors such as the local refineries’ operation, improved revenue generation, and increased oil production as potential contributors to a more stable naira. However, Financial Derivatives Company warns that the naira is likely to remain under pressure in 2024, potentially falling towards ₦1,350/$ before a rebound in the second quarter.
