The turbulent journey of the Nigerian Naira in the foreign exchange market continues to disrupt the nation’s economy and cast a shadow of doubt over investors’ confidence. Last week offered a brief glimmer of hope as the Naira strengthened against the US dollar, trading at N970/$1 in the parallel market, a notable improvement from the N1300/$1 exchange rate the week before.
However, the start of this week paints a different picture, as the Naira began to weaken once more, with exchange rates fluctuating between N1000 to N1020/$1 on Monday. This represents a slight depreciation from the weekend’s rate of N970/$1.
Furthermore, at the official FMDQ market, the Naira experienced a modest decline of 4.24 percent, falling to N809.02/$1 from N780.03/$1 on Friday.
In the midst of these currency fluctuations, Nigeria’s Foreign Exchange Reserves showed a marginal increase, rising to $33,340 million in October from $33,240 million in September 2023.
This ongoing instability in the Naira’s value can be traced back to the Central Bank of Nigeria’s decision to float the currency in the forex market on June 14. This move has sparked concerns and uncertainty among industry stakeholders.
Kalu Aja, a financial expert, expressed his perspective in an interview with Channels Television, asserting that the Naira’s stability is closely tied to the performance of crude oil sales. He emphasized that without a substantial increase in crude oil exports, the currency is likely to remain unstable.
This viewpoint coincides with Nigeria’s record of N5.14 trillion from crude oil sales in the first three months of 2023, an increase from N4.9 trillion in the previous quarter, as reported by the National Bureau of Statistics.
Adding his insight to the discussion, renowned economist Prof. Segun Ajibola, who also served as the former President and Chairman of the Council of Chartered Institute of Bankers, pointed out that the forex market’s current trends are indicative of a currency struggling to establish its fair market value. He emphasized the necessity for the Central Bank of Nigeria and the federal government to address the supply constraints affecting foreign exchange to restore stability to the Naira.
He emphasized, “Non-oil foreign exchange earnings must be doggedly driven to sustain an improved supply of dollars to the market amidst untamed demand for dollars for imports. Anything short of this would only create uncharted swings in the foreign exchange market, the type that has been witnessed in the market for weeks now.”
On a similar note, Prof. Godwin Oyedokun of Lead City University in Ibadan proposed seven key action points for the government to address the Naira’s instability in the forex market. These points include implementing sound monetary policies, enhancing foreign exchange reserves, promoting export diversification, controlling inflation, strengthening local industries, enhancing transparency and accountability, and bolstering investor confidence.
He emphasized the complexity of the challenge and the need for a comprehensive approach, stating that these suggestions serve as a starting point that should be accompanied by continuous monitoring and adjustments based on the evolving economic landscape.
Meanwhile, Mr. Idakolo Gbolade, the CEO of SD & D Capital Management, called for the government to increase its forex supply in the market to ensure Naira stability. He highlighted the crucial role of available forex in maintaining the Naira’s stability and stressed the importance of clearing backlogs and meeting new requests to boost confidence in the system.
The future of the Nigerian Naira remains uncertain, and it is evident that a multi-faceted strategy is required to address the issues plaguing the currency and restore faith in the nation’s financial stability.