In July, Nigeria’s external reserves experienced a decline of $167.2 million, as the value of the naira depreciated against the dollar. The reserves, which stood at $34.12 billion on June 30, 2023, fell to $33.95 billion as of July 28, 2023.
Within the past two weeks, the naira’s exchange rate at the parallel market fell from 820/$ to 868/$ on Monday. At the Investors’ and Exporters’ (I&E) window on the FMDQ, the naira started trading at 784.91/$ and reached a high of 830/$ before closing at 756/$.
Bureau de Change operators reported buying and selling the dollar at rates of 860/$ and 868/$ on Monday. The President of the Association of Bureau De Change Operators of Nigeria, Aminu Gwadabe, expressed concern over the lack of confidence in the local currency, leading to increased holding positions, hoarding, and speculation.
Gwadabe attributed the rising demand for dollars to factors such as oil marketers, investors’ backlog, school fees, and travelers, creating pressure on the limited availability of dollars in the market. He called for additional foreign finance to enhance liquidity and address the situation.
Opinion:
The decline in Nigeria’s external reserves and the weakening of the naira indicate ongoing challenges in the country’s forex market. The rising demand for dollars from various sectors is contributing to the pressure on the local currency. It is essential for the Central Bank of Nigeria to continue its intervention to stabilize the exchange rate and restore confidence in the naira. However, addressing the underlying issues, such as increasing the availability of dollars and enhancing foreign finance, will be crucial to achieving a more sustainable and stable forex market in Nigeria.