The exchange rate between the Nigerian naira and the US dollar experienced a significant decline, reaching N900/$1 on the black market, according to data received by Nairametrics on Tuesday. This marks a stark depreciation from the N840/$1 rate observed late last week, after the Central Bank of Nigeria (CBN) warned speculators about a potential decline.
Earlier on Tuesday, the rates traded around N865-N870/$1, but the evening brought a rapid decline, indicating a rising demand for dollars amidst ongoing supply challenges.
In mid-August, the naira had dropped to as low as N955/$1, causing concerns among investors that it might reach N1000/$1.
To address the depreciation of the exchange rate, the Tinubu administration has expressed its determination, backed by the CBN’s commitment to intervene. Additionally, the Nigerian government announced that the Nigerian National Petroleum Corporation (NNPC) secured a $3.5 billion borrowing deal to enhance supply amidst increasing demand pressures. These efforts aimed to strengthen the local currency and reduce the black market premium over the official Investors and Exporters (I&E) Window, potentially down to 5%, a trend favored by the market.
However, recent insights from JP Morgan disclosed that Nigeria’s central bank held net reserves of approximately $3.7 billion as of December 2022. This revelation puzzled analysts, leaving the exact cause behind the naira’s depreciation unclear.
Market operators, speaking anonymously to Nairametrics, suggested that mounting demand pressures are contributing to the currency’s slide. An operator, referred to as “Musa,” indicated that the naira’s brief appreciation earlier in the week was driven by speculator concerns of potential appreciation. Nonetheless, Musa emphasized that actual demand remains unmet due to unresolved supply issues, stating, “We have heard so much from the government, but we are yet to see the dollar. Maybe when it starts to flow, the exchange rate will be stronger.”
In related developments, the CBN has announced its intention to reintegrate Bureau de Change (BDC) operators into the forex market with revamped protocols, aiming to enhance liquidity at the retail level.
On the official I&E window, the naira-dollar exchange rate settled at N770/$1 on August 22, declining from N761.32 the previous day. The intra-day high reached N799.9/$1, while the intra-day low touched N720/$1. The day’s market activity registered a turnover of $122 million. The currency tracking platform AbokiFX also reported a Naira-Dollar exchange rate of N900/$1 on Tuesday.
