The naira witnessed a significant drop, reaching N1089.51 against the US dollar on the official Investor and Exporter window on Tuesday.
This marks a 27.19 percent decline from the N856.57/$ rate it closed on Monday, as per data from the FMDQ Securities Exchange.
During Tuesday’s trading, the naira experienced notable fluctuations, opening at N922.22/$, soaring to a high of N1251/$, and dropping to a low of N720/$ before settling at N1089.51/$ at the day’s close.
The total forex turnover for the day stood at $97.45 million.
This is not the first time the naira has closed below N1,000 on the official window. Past records show similar trends, with the naira hitting an all-time low of N1,099.05/$ on December 8, 2023, followed by N1043.09/$ on December 28, 2023, and N1035.12/$ on January 3, 2024.
Tuesday’s closing rate is the second-lowest the naira has reached since the Central Bank of Nigeria (CBN) removed the currency’s rate cap.
Despite the CBN’s concerted efforts to stabilize the naira, including clearing backlogs of matured foreign exchange obligations, the currency continues to struggle.
The CBN recently announced the payment of $2 billion as part of its backlog obligations, but reports suggest that the bank still owes around $7 billion in forward contract obligations.
Additionally, the CBN disclosed the disbursement of $61.64 million to foreign airlines as part of the matured forex owed to them.
The CBN Acting Director of Corporate Communications, Hakama Alia, said, “These payments signify the CBN’s ongoing efforts to settle all remaining valid forward transactions, to alleviate the current pressure on the country’s exchange rate.
“It is anticipated that this initiative by the CBN should provide a considerable boost to the Naira hug against other major world currencies and further increase investor confidence in the Nigeria economy.”
Also, this current depreciation of the naira against the dollar is in the face of the government’s renewed effort to boost liquidity in the foreign exchange market.
At the end of 2023, the Minister of Finance and Coordinating Minister of Economy, Wale Edun, disclosed that the federal government had received a $2.25 billion foreign exchange support facility from the African Import-Export Bank.
According to the minister, the first tranche of its $3.3 billion facility from the bank aims to resolve FX shortages in the economy.
Commenting on the issue, the Chief Executive Officer, Economic Associates, Dr Ayo Teriba, noted that the volatility of the naira is because of inadequate foreign exchange supply.
He said, “Reserves are low and declining, the CBN is known to be in arrears on some of its obligations. It has started clearing its arrears and has pledged to clear all of it in due course.”
He stated that the government has been making efforts to boost FX supply through investments, but these are yet to materialise, yet.
He declared, “I am optimistic that if the government can walk their thought about opening to investors, we would get the forex to boost reserves and meet the demand in the FX market, and the naira would stabilise. I want to see the N1000/$ as a reflection of FX shortages. I want to hope that Nigeria will in the next few weeks take the right steps.
“We were to take the NNPC to the market last year, but it didn’t happen. These are things we can fast-track. Nigeria has options.”
Teriba highlighted that the recent inflow of $2.3bn as crude forwards won’t solve the country’s supply issues.
He added, “We need to put down enough access to attract foreign exchange inflows. The naira will stabilise, inflation will come down, growth will pick up, and the living standard will improve. If we do not act, the volatility will continue, and this will be a bottomless pit. We need to build a wall of reserves so that the FX market will improve.”