The Nigerian currency, the naira, witnessed a depreciation of 5.9 per cent against the dollar month-on-month (m/m) in April, following increased demand amid low liquidity.
Data from the FMDQ Securities Exchange Limited showed that the forex market closed the month at N1,390.96 per dollar on April 30, 2024, weaker than N1,309.39 closed in March 2024 at the Nigerian Autonomous Foreign Exchange Market (NAFEM) window.
In tandem, the parallel market also saw a decline, with the naira weakening by 2.96 per cent m/m to N1,350/$1 in April 2024, as against N1310 per dollar closed on March 2024, according to the data collated from street traders and online foreign exchange (FX) trading platforms.
The depreciation comes amid a backdrop of economic uncertainties and global market fluctuations. Analysts attribute the decline to various factors, including dwindling foreign exchange reserves, rising inflationary pressures, and subdued economic growth. The Central Bank of Nigeria (CBN) has been grappling with managing the exchange rate amidst mounting pressures on the local currency.
“At the currency market, the Naira performance was underwhelming considering its bullish start for the month,” the analysts at Afrinvest Securities Limited said.
On a day-on-day basis, the local currency closed flat on Friday to N1,400.40 per dollar, losing slightly by 0.16 per cent compared with N1,402.67 closed on Thursday at NAFEM.
The intraday high closed at N1,435 on Friday, stronger than the N1,445 closed previous one. The intraday low depreciated to N1,300.40 on Friday as against N1,299.42 on Thursday.
The volume of dollars supplied by willing buyers and willing sellers declined by 13.29 per cent to $201.88 million on Friday from $232.84 million recorded on Thursday. The Naira closed flat at N1,380 against the dollar on the parallel market.
Despite the recent slide, analysts at Afrinvest Securities Limited anticipate the naira to maintain its current trading band in the near term, barring any unforeseen shocks. Concerns linger over the sustainability of the currency’s stability amidst ongoing economic challenges and external pressures.
Looking ahead, “we expect the Naira to be exchanged within the current band, barring any shocks,” analysts at Afrinvest said.
The depreciation in the parallel market underscores the persistent demand for foreign currency, driven by import-dependent sectors and capital flight. It highlights the need for concerted efforts to address structural imbalances in the economy and enhance foreign exchange liquidity.
