The Nigerian Naira experienced a significant depreciation, reaching an all-time low of N993.82 per dollar at the official foreign exchange market. This was attributed to low dollar inflow and a notable decline in daily foreign exchange market turnover. The government is planning to implement various measures, including a crackdown on illegal currency trading, to narrow the significant gap between the official and unofficial exchange rates.
Key Points:
- Sharp Naira Depreciation:
- The Naira’s value fell by 25.81 percent, with one dollar now being quoted at N993.82. This marks a significant drop from the N789.94 rate recorded just the previous Friday.
- Low Dollar Supply:
- The FX market experienced a notable decrease in dollar supply, leading to a 66.01 percent decline in daily foreign exchange market turnover. On Monday, the turnover dropped to $88.31 million from $259.84 million on the preceding Friday.
- Government’s Response:
- Nigeria is planning a series of policies to address the wide gap between the official and unofficial exchange rates. This includes measures to combat illegal currency trading. The aim is to achieve a “fair price” of 750 Naira to the dollar by the end of the year.
- Parallel Market Performance:
- On the parallel market, also known as the black market, the Naira gained further strength, with the dollar falling to N1,170. This was an improvement from the N1,200 rate observed on the previous Friday.
- Government’s Influence on Naira Appreciation:
- Traders attribute the recent appreciation of the Naira to government policies, which have created uncertainty among speculators.
- Government’s Digitalization Plans:
- The Federal Government is taking steps to digitize FX transactions, aiming to discourage speculative demands and the hoarding of FX in cash.
Conclusion: The sharp depreciation of the Naira to an all-time low against the dollar underscores the challenges faced by Nigeria’s foreign exchange market. The government’s planned measures, including cracking down on illegal trading and digitalizing transactions, are aimed at stabilizing the currency and narrowing the gap between official and unofficial rates. These steps will be crucial in restoring confidence in the foreign exchange market and ensuring the stability of the Naira.
