The naira fell to N1089.51/$ on the official Investor and Exporter window on Tuesday.
The naira experienced a 27.19% decline, dropping from N856.57/$ on Monday to N1089.51/$ on Tuesday, as reported by data from the FMDQ Securities Exchange.
On Tuesday, the naira commenced trading at N922.22/$, reached a peak of N1251/$, hit a low of N720/$, and eventually closed at N1089.51/$.
The total forex turnover for the day amounted to $97.45 million.
This marks the fourth instance of the naira closing below N1,000 on the official window. On December 8, 2023, the naira hit an all-time low of N1,099.05/$, followed by N1043.09/$ on December 28, 2023, and N1035.12/$ on January 3, 2024.
The closing rate of N1089.51/$ on Tuesday is the second-lowest recorded for the naira on the official FX window since the Central Bank of Nigeria removed the rate cap.
The persistent depreciation of the naira persists despite the Central Bank’s endeavors to settle matured foreign exchange obligations owed to Deposit Money Banks. The CBN recently announced the payment of $2 billion to address part of its backlog obligations.
It is reported that the bank still has outstanding forward contract obligations amounting to $7 billion. The CBN disclosed this information while confirming the disbursement of $61.64 million to foreign airlines as payment for matured foreign exchange owed to them.
The CBN Acting Director of Corporate Communications, Hakama Alia, said, “These payments signify the CBN’s ongoing efforts to settle all remaining valid forward transactions, to alleviate the current pressure on the country’s exchange rate.
“It is anticipated that this initiative by the CBN should provide a considerable boost to the Naira hug against other major world currencies and further increase investor confidence in the Nigeria economy.”
Despite the government’s renewed efforts to enhance liquidity in the foreign exchange market, the naira continues to depreciate against the dollar.
At the close of 2023, Wale Edun, the Minister of Finance and Coordinating Minister of Economy, revealed that the Federal Government had secured a $2.25 billion foreign exchange support facility from the African Import-Export Bank.
This financial aid, part of a $3.3 billion facility, aims to address foreign exchange shortages in the economy. Dr. Ayo Teriba, the Chief Executive Officer of Economic Associates, attributed the naira’s volatility to insufficient foreign exchange supply.
He said, “Reserves are low and declining, the CBN is known to be in arrears on some of its obligations. It has started clearing its arrears and has pledged to clear all of it in due course.”
He stated that the government has been making efforts to boost FX supply through investments, but these are yet to materialise, yet.
He declared, “I am optimistic that if the government can walk their thought about opening to investors, we would get the forex to boost reserves and meet the demand in the FX market, and the naira would stabilise. I want to see the N1000/$ as a reflection of FX shortages. I want to hope that Nigeria will in the next few weeks take the right steps.
“We were to take the NNPC to the market last year, but it didn’t happen. These are things we can fast-track. Nigeria has options.”
Teriba highlighted that the recent inflow of $2.3bn as crude forwards won’t solve the country’s supply issues.
He added, “We need to put down enough access to attract foreign exchange inflows. The naira will stabilise, inflation will come down, growth will pick up, and the living standard will improve. If we do not act, the volatility will continue, and this will be a bottomless pit. We need to build a wall of reserves so that the FX market will improve.”