Naira Plummets to Record Low: Dips to N996/$1 in Latest NAFEM Update

The Nigerian currency, the naira, experienced a significant downturn on Thursday, closing at N996.75 per dollar in the official market and further plummeting to N1090 per dollar in the parallel market. This unexpected decline has left many analysts puzzled, especially in light of the recent efforts by the Central Bank of Nigeria (CBN) to clear some of its foreign exchange (FX) backlog, a move intended to instill confidence in the currency.

Data from the NAFEM, where forex is officially traded, revealed that the naira depreciated by 12.24% to reach N996.75 against the dollar at the close of business on Thursday. This marks a loss of N122.04 or a 12.24% decline compared to its closing rate of N874.71 on Wednesday, setting a new all-time low according to Infostride News, surpassing the previous record of N993.8 on October 30th.

The intraday fluctuations were noteworthy, with the exchange rate reaching a high of N1100/$1 and a low of N744.00/$1, showcasing a substantial spread of N356/$1. Forex turnover at the official NAFEM window recorded a significant increase of 101.32%, amounting to $228.54 million at the close of trading.

In parallel markets where forex transactions occur unofficially, the naira also weakened, experiencing a 5.5% depreciation to be quoted at N1090/$1, while peer-to-peer traders quoted around N1110.10/$1. The narrowing gap between the official and parallel market rates, standing at approximately N100, indicates a convergence, approaching a 10% premium, a margin generally deemed acceptable.

Experts in the financial sector have voiced concerns about the continuous decline of the naira in both the official NAFEM and unofficial markets. Some suggest bold measures, including the de-dollarization of the economy by declaring any local transactions in US dollars as illegal. Dr. Biodun Adedipe, the founder and chief consultant of B. Adedipe Associates Limited (BAA Consult), proposes strategies to strengthen the naira, such as preventing government agencies from charging local operators and entities in US dollars. Adedipe emphasizes the need to make the sale of crude oil to local refineries in Naira rather than in US dollars.

Adedipe urges the CBN to transparently engage with participating banks at the Investors and Exporters (I&E) Window. He advocates for a comprehensive de-dollarization policy, addressing various aspects of the economy, including the maritime sector’s common practice of charging local operators in US dollars. Additionally, he suggests that President Bola Tinubu should directly engage with bank CEOs to garner ideas and enlist their support for market reforms, acknowledging the challenges posed by unified exchange rates in a structurally defective and weak economy.

Earlier reports from Infostride News highlighted warnings from the Association of Bureau de Change Operators of Nigeria (ABCON) against speculating on the naira. Aminu Gwadabe, the President of ABCON, cautioned speculators, noting that the CBN was poised to take measures against them. Gwadabe attributed the market dynamics and naira rebounds to the CBN’s dual strategy of injecting dollar liquidity and mopping up naira through interest rate hikes. He emphasized that such measures were designed to deter speculation, hoarding, and substituting naira for other currencies, characterizing them as positive developments for the currency stability.