Naira Weakens Further, Hits N1,705/$ as Currency Faces Renewed Pressure

The Nigerian Naira has faced renewed pressure in the parallel market, recording a significant depreciation over the past week. As of the end of September, the Naira traded at N1,705/$1.00, compared to N1,655/$1.00 just a week earlier.

Data from Vanguard’s Naira watch reveals that this steady decline marks the first major drop in weeks, diverging from the previous narrow fluctuations between N1,645 and N1,655/$1.00 seen in the last two months. Dealers in the parallel market attributed the depreciation to a shortfall in foreign exchange supply over the past two weeks.

This depreciation has also impacted the official market, as data from the FMDQ Exchange shows that the indicative exchange rate in the Nigeria Autonomous Foreign Exchange Market (NAFEM) fell to N1,541.94/$1.00 on Monday, from N1,540.78/$1.00 over the weekend.

The recent trends highlight a reversal of the positive momentum observed towards the end of 2023, when the Naira closed at N1,215/$1.00 in the parallel market after a high of N1,800/$1.00 in Q3’23. At the beginning of 2024, the Naira appreciated further, trading at N1,220/$1.00. However, by the second quarter, the Naira began a steady depreciation, ending Q2’24 with an average of N1,620/$1.00.

After two months of relative stability at N1,630/$1.00 during Q3, the latest round of depreciation has sparked concerns of a return to the high levels of depreciation seen in Q4’23.

Economic analysts are predicting further increases in prices due to the ongoing depreciation of the Naira, particularly in the parallel market. Dr. Uju Ogubunka, President of the Bank Customers Association of Nigeria (BCAN), explained that the Naira’s decline can be linked to rising demand amid limited supply. He also noted that this situation is likely to lead to higher costs for imported goods, which will be passed on to consumers.

In the midst of these challenges, turnover in the NAFEM increased by 61% year-on-year, rising to $33.7 billion in the first nine months of 2024, compared to $20.9 billion in the same period of 2023.