The Nigerian Naira extended its decline, crossing the N1,000 per dollar mark for the second time in 2024 on the official foreign exchange (FX) market.
The naira fell to 1,089.51/$ on Tuesday from 856.57/$ on the previous day at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from the FMDQ Exchange.
The first time the local currency closed at over N1,000 against the greenback this year was on January 3, 2024, when it tumbled to N1,035.12/$ at the NAFEM.
The naira fell to 1,099.05/$ on December 8 and 1,043.09/$ on December 28, 2023, on the FX market.
During Tuesday’s trading, willing buyers and sellers quoted the dollar at N1,251, representing the highest bid rate, and at N720/$, the lowest spot rate. The daily FX market turnover witnessed a 63.34 per cent surge to $97.45 million on Tuesday, compared to the $59.66 million recorded the day before.
The underlying reasons behind this depreciation are multifaceted, involving economic uncertainties, global market dynamics, and domestic fiscal challenges.
This downturn in the naira’s value raises concerns about its implications for households and the Nigerian economy at large. As the exchange rate worsens, the cost of imported goods rises, potentially leading to increased inflation and impacting the purchasing power of households.
Additionally, businesses may face challenges due to higher import costs, potentially hindering economic growth in the country. Authorities closely monitor the situation as efforts are made to address the root causes of the naira’s decline and stabilize the foreign exchange market.
In the latest monthly economic report released by the Central Bank of Nigeria (CBN), it has been revealed that the total foreign exchange (FX) inflow into the Nigerian economy experienced a notable 10 percent month-on-month increase, reaching USD5.7 billion in August 2023.
This upswing in FX inflow is chiefly attributed to a substantial 17 percent quarter-on-quarter surge in FX revenues from autonomous sources, amounting to $3.3 billion. Conversely, the FX inflow through the CBN, constituting 43 percent of the total FX inflows, witnessed a modest -6 percent month-on-month decline, settling at $2.4 billion in August 2023.
The year-on-year perspective indicates a significant -19 percent decline in FX inflow into the economy, dropping to $5.7 billion in August 2023. The contrasting dynamics between the monthly and yearly figures underscore the complexities influencing the foreign exchange landscape.
Analysts posit that the surge in autonomous FX revenues could indicate increased economic activities or diverse sources of foreign exchange inflows. On the other hand, the dip in CBN-mediated inflows might result from various factors, potentially warranting a closer examination of the central bank’s policies and market dynamics.
As stakeholders assess the implications of these trends, attention is drawn to the need for a comprehensive understanding of the factors driving the ebb and flow of foreign exchange into the Nigerian economy, signalling potential areas for policy adjustments and strategic interventions.