Naira Declines to N1,400/$ Amid Renewed Demand Pressure

The Nigerian naira has weakened significantly, dropping to N1,400 against the US dollar in the black market due to mounting demand pressure in the foreign exchange (FX) market. This notable decline follows a period of increased instability in Nigeria’s currency value, impacting both local businesses and foreign investors.

This drop represents a substantial loss for the naira, which has seen a depreciation of 19.64% within the last two weeks. The naira’s value against the US dollar has diminished from N1,125 on April 12, 2024, to the current rate, signaling ongoing challenges for the Nigerian economy.

At the Nigerian Autonomous Foreign Exchange Market (NAFEM), the naira’s position has also deteriorated, hitting N1,308.52 per dollar. Data from the FMDQ Securities Exchange reveals that this marks a 12.69% drop from the N1,142.38 per dollar recorded on April 12, 2024.

Market experts suggest that the recent retreat of the naira can be attributed to a decrease in dollar liquidity, following the departure of some foreign portfolio investors concerned about the Israel-Hamas war and a strengthening US dollar. A source informed BusinessDay that the absence of hedging tools like Non-Deliverable Forwards (NDFs) and Exchange-Traded Derivatives (ETDs) has left foreign investors exposed to these uncertainties.

Additionally, the Central Bank of Nigeria (CBN) approved the allocation of $15.83 million to 1,583 Bureau De Change (BDC) operators, offering $10,000 to each at a rate of N1,021 per US dollar. This initiative is designed to stabilize the foreign exchange market and increase accessibility to foreign currency for eligible end users. BDC operators are expected to sell the currency at a spread not exceeding 1.5% above the purchase price.

Hassan Mahmud, Director of the Trade and Exchange Department at the CBN, emphasized the importance of BDCs following the established guidelines to ensure transparency and fair pricing. This effort aims to create a more stable FX market, supporting both international trade and local businesses. However, the long-term impact of these measures remains to be seen as the naira continues to face significant pressure from various global factors.