Naira on Wednesday hit a record low of N1,043.09 per dollar, following strong demand for the greenback amid dollar shortage at the official foreign exchange (FX) market.
After trading on Wednesday, the local currency depreciated by 19.54 percent as the dollar was quoted at N1,043.09 compared to N872.59 quoted on the previous day at the Nigeria Autonomous Foreign Exchange Market (NAFEM).
The FX market witnessed low liquidity as the daily foreign exchange market turnover declined by 34.62 percent to $83.63 million on Wednesday from $127.93 million recorded on Tuesday.
Willing buyers and willing sellers quoted the dollar at a bid rate of N1,235.65, the same as of Tuesday spot trading, while the lower segment closed at a bid rate of N720, stronger than N740 per dollar on Tuesday.
The depreciation of the naira can have several negative impacts on the Nigerian economy. It can make imports more expensive, leading to higher prices for consumers and businesses. It can also discourage foreign investment and make it more difficult for Nigerian businesses to compete in the global market.
In recent years, the Nigerian government has taken several steps to stabilize the naira, including tightening monetary policy and intervening in the foreign exchange market. However, the success of these efforts has been limited, and the naira has continued to depreciate against the dollar.
In June 2023, the CBN collapsed all segments of the FX market into the Investors and exporters (I&E) window, now NAFEM. This aimed to improve transparency and access to FX for all market participants.
In October 2023, the CBN restored the 43 items prohibited from access to FX eight years after a move to usher in a single exchange rate.
As part of its responsibility to ensure price stability, the CBN said it would boost liquidity in the Nigerian foreign exchange market by interventions from time to time.
“As market liquidity improves, these CBN interventions will gradually decrease”, the CBN said.
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