Data from the FMDQ Exchange shows that on Tuesday, November 6, 2024, at the official Investor and Exporter (I&E) window, the value of the naira fell to its lowest point ever, N1681 per dollar.
This decline in value marks a new low point for the currency and underscores the ongoing constraints on Nigeria’s foreign exchange market.
The closing price of N1676.9/$1 on Monday, which had already reached an annual high and represented the naira’s fast depreciation versus the dollar in recent months, was followed by Tuesday’s rate decrease.
What The Data Indicates
Final Currency Rate: On Tuesday, the naira finished at N1681/$1, down from N1676.9/$1 on Monday.
- Turnover in the Market: Tuesday’s turnover was $196.7 million, compared to Monday’s $218 million. The turnover has decreased from $245 million in October to $147 million per day on average so far in November.
- Parallel Market Rates: The official and unofficial exchange rates differed significantly, with the parallel market rate circling at N1735/$1.
- External Funds: The Central Bank of Nigeria (CBN) reports that the country’s external reserves are at $39.9 billion. Even though reserves have remained stable, strong demand pressures have not stopped the naira from falling to all-time lows.
Effects of the U.S. Election
The U.S. presidential election, in which former President Donald Trump beat Vice President Kamala Harris to retake power, coincides with the devaluation of the naira. Nigeria’s economy may experience a range of effects from Trump’s anticipated economic policies:
- Costs of Energy: Trump’s past support for lower global energy prices may decrease Nigeria’s oil income. Any decline in crude oil prices could reduce Nigeria’s dollar inflows and exacerbate the supply-demand imbalance in the foreign exchange market.
- Interest rates: Nigeria may benefit from Trump’s penchant for lower interest rates. If lower rates improve global liquidity, more foreign investors looking for higher returns may enter the market, which might stabilise the naira if the inflows get stronger.
What To Note
Nigeria’s currency has lost over 45% of its value this year, which is among the biggest declines in the world.
- The pressure the naira has been under all year, with demand exceeding supply, is reflected in the fluctuations of the exchange rate in November.
- Unless dollar inflows significantly improve or demand pressures decrease, this pattern will probably continue.
The Central Bank is under increased pressure to control currency market liquidity due to the growing discrepancy between official and unofficial rates.
- Growth in diaspora remittances, which reached $600 million per month, has helped the central bank’s efforts to control the FX fall.
- However, since other variables are still impacting the currency markets, this has not yet affected the exchange rate.
- Nigeria, for instance, is still struggling with large fiscal deficits in spite of declining capital imports.
- Another issue is the Dangote Refinery controversy, which puts pressure on the naira since marketers promise to keep importing.
