The Nigerian Naira experienced a significant decline, reaching a record low of N1,310 per US dollar on the parallel market, commonly referred to as the black market. This represents a 6.07% decrease compared to the previous day’s closing rate of N1,235 per dollar.
Key Points:
- Factors Behind the Decline:
- The Naira’s depreciation is attributed to strong demand for foreign currency on the parallel market. This downward trend contrasts with the previous day’s slight strengthening against the dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
- Finance Minister’s Statement:
- Nigeria’s Finance Minister, Wale Edun, announced an anticipated influx of up to $10 billion in new foreign currency inflows in the coming weeks. This is aimed at alleviating the acute shortage of dollars in the foreign exchange market.
- NAFEM Exchange Rate:
- Following trading at NAFEM, one US dollar was quoted at N847.77, which is weaker than the previous day’s rates of N793.34 and N808.27 recorded on Friday.
- Bid Rate at Parallel Market:
- In the parallel market, willing buyers and sellers set a bid rate ranging from N700/$ (low) to N900/$ (high).
- FX Market Turnover:
- The daily turnover in the foreign exchange market increased by 8.03% to $88.10 million on Tuesday, compared to $81.55 million on Monday and $79.26 million on Friday in the official market.
- Analysts’ Perspectives:
- Analysts suggest that the Naira’s stability in the short term hinges on the anticipated $10 billion inflow into the economy.
- Foreign Exchange Reserves:
- Nigeria’s foreign exchange reserves saw a slight increase of 0.18% over the past week, reaching $33.28 billion as of October 23, 2023.
- Treasury Bills Market:
- The Nigeria Treasury Bills (NT-Bills) secondary market closed with average yields remaining unchanged at 6.36%. Yields across short, medium, and long-term maturities also remained steady.
- Open Market Operation (OMO) Bills:
- The OMO bills market recorded a marginal decline in average yield across the curve, closing at 12.04% compared to 12.05% on the previous day.
Conclusion: The Naira’s descent to a historic low of N1,310 per US dollar underscores the challenges faced by the Nigerian currency. The anticipated injection of $10 billion into the economy is seen as a potential stabilizing factor. However, ongoing efforts will be required to address the dynamics influencing the foreign exchange market and the Naira’s valuation.
