The Nigerian naira has experienced a significant devaluation of 26.36 percent against the US dollar at the foreign exchange market’s official Investor and Exporter window.
This decline follows the Central Bank of Nigeria‘s (CBN) announcement that it had cleared $2 billion from its backlog of forward contract obligations, including a disbursement of $61.64 million to foreign airlines.
The CBN’s Acting Director of Corporate Communications, Hakama Sidi Alia, stated that these payments are part of ongoing efforts to settle valid forward transactions and alleviate pressure on the exchange rate.
Alia expressed hope that this initiative would strengthen the naira and boost investor confidence in the Nigerian economy.
Despite these measures, the naira closed trading at N856.57/$ on Monday and fell to N1082.32/$ as of Wednesday, per data from the FMDQ Securities Exchange.
This marks the fifth time the naira has closed above N1000 since the CBN removed the rate cap on the currency.
The naira’s depreciation continues despite efforts to boost liquidity in the foreign exchange market.
The Minister of Finance and Coordinating Minister of Economy, Wale Edun, disclosed the receipt of a $2.25 billion foreign exchange support facility from the African Import-Export Bank.
This facility, part of a $3.3 billion agreement, aims to resolve FX shortages in the economy.
Dr. Ayo Teriba, CEO of Economic Associates, who spoke with Punch, attributes the naira’s volatility to inadequate foreign exchange supply.
He emphasized the need for openness to investors to boost reserves and meet FX market demand.
The President of the Nigerian Economic Society, Prof. Adeola Adenikinju, predicts more stability for the naira in 2024, contingent on local refinery operations, revenue generation, and oil production improvements.
He anticipates the naira may stabilize around N900/$ towards the year’s end.
However, the Financial Derivatives Company warns that the naira will remain under pressure in 2024, with the CBN having limited capacity to defend the currency.
They predict a potential fall to N1,350/$ before a rebound in the second quarter of 2024.
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These developments indicate a challenging road ahead for the Nigerian currency, with experts suggesting various strategies and outcomes for the naira in the coming months.