The foreign exchange (FX) market closed on Monday with naira losing 1.79 percent at the Investors’ and Exporters’ (I&E) forex window, Nigeria’s official FX market.
After trading on Monday, the dollar was quoted at N792.04 as against N777.82 quoted on Friday, data from the FMDQ indicated.
The naira depreciation was attributed to shortage of the greenback amid strong demand.
The daily foreign exchange market turnover declined by 36.58 percent to $49.46 million on Monday from $77.99 million recorded on Friday.
Willing buyers and sellers maintained bids as high as N855.00, the same as on Friday, but weaker than N844.00 bid on Thursday.
The market auction also recorded lower bids of N650.00, stronger than N665.00 bids maintained on Friday at the I&E window.
At the parallel market, popularly known as black market, naira appreciated by 0.34 percent as demand moderated.
The FX market closed with the dollar trading at the rate of N867 on Monday as against N870 quoted during intraday trading at the black market.
“We anticipate the naira to depreciate further on demand concerns barring any market distortions. In contrast, the market adjusts itself in line with the prevailing forces of demand and supply,” analysts at Cowry Asset Management Limited said.
Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise, said the foreign exchange market is evidently under pressure as a result of a number of factors.
There was a curious surge in monetary expansion in the last one month. Money supply grew by an unprecedented 15 percent in one month between May and June 2023. Broad money grew by over N9 trillion, from N55.7 trillion to N64.9 trillion. This surge in monetary growth is unprecedented.
“Obviously, this must have had an effect on the exchange rate. The monetary authorities should investigate this drastic growth in money supply and take steps to curb subsequent expansion. Such dramatic growth in money supply poses a significant risk to macroeconomic stability, especially price stability”, he said.
According to him, over the last few years there had been a cumulative backlog of unmet foreign exchange demand, running into billions of dollars as a result of acute illiquidity in the foreign exchange market. With a more liberalized forex market , the pressure of the backlog of unmet demands and other maturing forex related obligations have been unleashed on the investors and exporters window.