Financial analysts are warning that the Nigerian naira may soon reach an alarming exchange rate of N2000 to a dollar within the next few months, citing the ongoing depreciation of the currency in both official and parallel markets, despite the efforts made by the Central Bank of Nigeria (CBN).
As of December 31, 2023, the naira stood at N1,120/$, but it experienced a significant decline to N1,400 on Friday, January 26, 2024, in the black market, marking a drop of N200 or 16.6%. The official market also witnessed a decrease from N898 to N910 during the same period.
The naira’s depreciation reached new lows in both official and parallel markets during intraday trading. At the official market, it plummeted to about N1,399 per dollar, reflecting a 16.55% drop, with a low of N789 per dollar. Last week, the official market recorded a historic decline, reaching an intraday high of N1,399 per dollar on January 25, 2024, according to data from FMDQ, representing a significant 6.15% drop compared to the previous day.
Despite efforts by the CBN to address the forex challenges, including clearing a substantial portion of the $7 billion forex backlog and releasing funds to foreign airlines, forex shortages persist, impacting the naira’s value. The CBN has committed to resolving the remaining forex obligations and maintaining a functional foreign exchange market.
In June 2023, the CBN shifted to a “market-reflective” official exchange rate, intending to attract investors and bridge the gap between official and street rates. However, the naira’s decline accelerated, leading to over 50% depreciation after consolidating forex exchange windows into the Investors and Exporters (I&E) window.
To stabilize the volatile foreign exchange market, the Nigerian National Petroleum Corporation Limited (NNPCL) is seeking a $3 billion emergency loan from the Afreximbank. Analysts express concern about the CBN’s limited capacity to intervene due to dwindling foreign reserves, emphasizing the need for increased support from the Federal Government, possibly through selling moribund assets to raise foreign exchange.
Financial experts, including Simon Akilo and Cyril Ampka, stress the urgency of comprehensive measures to address the worsening situation, emphasizing the critical role of government support to stabilize the naira and boost businesses reliant on forex.
