Naira Slumps to N988 over Unabated FX Demand Pressure
The Nigerian naira exchange rate suffered from foreign currency demand pressures at the first trading session in 2024, exchanged at N988.46 per US dollar on Tuesday, according to data from the FMDQ FX platform.
The exchange rate is not expected to improve in 2024 despite government efforts to reduce the spread between official and parallel market rates. Noting that there is no positive shift significant enough to upturn the local currency’s fortune, value and market weight, a slew of FX analysts believe that the naira will cross N1,000 at Nigeria’s Autonomous Foreign Exchange market in the first quarter of the year.
The exchange rate crossed the red line in 2023 as demand continued to outpace the foreign currency supply as a result of US dollar scarcity in the economy. Trying to redirect exchange rate policy, the central bank was absent in the official market to support the naira from free falling due to large unmet FX demand logged by manufacturers, importers and other invisible forex users.
In the foreign exchange market, the Naira depreciated by 8.97% closing at N988.46 per US dollar from N907.11 which was its previous close. In the parallel market, the Naira closed at N1,210 against the US dollar amidst soft demand for foreign currency by local manufacturers and other users.
Oil prices continue to swing in the global commodity market. Yesterday, Brent Crude increased by 0.29% to trade at $77.26 per barrel, while WTI declined by 0.01% to trade at $71.64 per barrel at the start of the year on Tuesday.
Nigeria’s external reserves inched to $32.91 billion, translating to seven months imports cover for the nation that depends heavily on imported items to survive. The country was unable to build foreign reserves during the oil boom as a result of bottlenecks and administrative issues.
Oil production went down significantly before it started to pick up in the second quarter of the year. Nigeria also engaged in oil-swapping deals.
In 2023, Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN) said new foreign exchange guidelines and legislation will be developed, and extensive consultations will be conducted with banks and FX market operators before implementing any new requirements. Naira Devaluation Deepens Economic Crisis in Nigeria
