Naira Crashes to N1,234/$ in Official Market; Speculators Resume Hoarding

The Nigerian naira plunged to an unprecedented low of N1,234 per United States dollar in the official foreign exchange market on Monday, signaling a 5.26% depreciation from the previous week’s rate of N1,169.99. The sharp drop has fueled speculation that the local currency may face further volatility as hoarding resumes among forex traders.

The decline follows a brief period of stability last week, with the naira hovering around N1,072.74 against the dollar on Wednesday, leading some traders to speculate that it could drop below the symbolic threshold of N1,000/$1 for the first time. However, the Central Bank of Nigeria’s (CBN) recent decision not to defend the naira has triggered uncertainty in the market.

CBN Governor Yemi Cardoso, addressing the International Monetary Fund/World Bank Spring Meetings, confirmed that the central bank would not intervene in the foreign exchange market unless unusual circumstances arose. This stance coincides with a significant reduction in Nigeria’s foreign exchange reserves, which dipped to $32.1 billion as of April 18, down $2.35 billion from the previous month.

“We do not intend to defend the naira,” Governor Cardoso clarified, dismissing claims that the reserve drop was connected to the currency’s recent slump. Despite this, the local currency’s ongoing volatility has prompted concerns among investors and business stakeholders.

In parallel markets, the naira’s trading rates ranged between N1,250 and N1,270 against the dollar on Monday, a notable increase from the N1,154 recorded last Friday. Bureau de Change operators cited market forces as the primary reason for the uptick, admitting uncertainty about future fluctuations.

Speculation has also arisen around the role of cryptocurrency exchanges in the naira’s recent depreciation. Following the Central Bank’s crackdown on Binance, the naira experienced severe devaluation in mid-February, reaching as low as N1,950. Accusations have since shifted to new crypto platforms BYBIT and BITGET for their alleged role in manipulating the market.

Market analysts suggest that the recent depreciation trend began six months ago, with the black market showing significant volatility following disbursements by the Federation Account Allocation Committee (FAAC) to federal, state, and local governments. The intra-day high depreciated, closing at N1,295 per dollar, while the intra-day low reached N1,051/$, with a slight decrease in daily turnover at $110.17 million.

The once-surging naira has lost its status as the world’s best-performing currency, following its first weekly decline in several weeks on the parallel market. As speculators resume hoarding and uncertainty looms, market observers await further developments that could shape the naira’s future trajectory.