The naira on Friday fell to one month-low of 1,470 against the dollar, on the parallel market also known as black market, following dollar shortage and the activities of speculators.
The local currency depreciated to as low as N1,510 as of March 21, 2024 at the parallel market. On a daily trading basis, the naira weakened by 2.04 percent from N1,440 per dollar quoted on Thursday.
One of the street traders at CMS, Lagos Island, told BusinessDay that the dollar is very scarce and demand, also very high on the black market.
The naira closed weaker as the dollar was quoted at N1,459.73 on Thursday compared to N1,421.06 quoted on Wednesday, at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to the data released by the FMDQ Securities Exchange Limited.
Bismarck Rewane, managing director/chief executive officer of Financial Derivatives Company Limited, emphasized the urgent need for a revival of the Naira. During his presentation at the Lagos Business School in May 2024, Rewane highlighted the necessity for swift measures to bolster the currency, advocating for the infusion of fresh funds through Eurobonds and Diaspora flows, with proposed targets ranging from $19 to $25 billion.
Explaining the persistent pressure on the Naira, Rewane attributed it to Nigeria’s external imbalances, stemming from disruptions in oil production, declining oil prices, and speculative activities in the market. He pointed out factors such as a negative trade balance equivalent to 0.86 percent of GDP, which has intensified pressure on the Nigerian currency market.
Additionally, Rewane noted that regulatory arbitrage has further exacerbated the situation, complicating efforts to stabilize the Naira.
He noted that the naira was was overvalued before the FX reform that took place in June 2023, adding that undervaluation occurred between July 2023 and December 2023, and since January 2024, the naira has become overvalued.
“The naira has a checkered history, witnessing profound disruption over the past three decades. It remains a non-convertible currency, its exchange rate influenced by economics, politics, and policy,” said Rewane.
