Thursday’s continued weakening of the naira on the official foreign exchange (FX) market was caused by a decline in dollar sales by market participants.
According to data from the FMDQ Securities Exchange Limited, the naira lost 10.45 percent of its value after trading on Thursday when the dollar was quoted at N1,484.75, weaker than N1,329.65 posted on Wednesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
The amount of dollars supplied by interested sellers and ready purchasers fell by 30.05 percent on Thursday, from $336.54 million on Wednesday to $235.41 million.
According to the summary of the foreign exchange auction, the intraday peak on Thursday closed at N1,520 per dollar, down from the stated N1,506/$1 on Wednesday. Thursday’s intraday low dropped to N1,100, which was less than the Wednesday’s exchange of N1,010.
The Naira closed unchanged at N1,480 on Thursday at the parallel market, popularly referred to as the black market.
Despite the Central Bank of Nigeria’s (CBN) regulations and interventions, the local currency has kept declining in the foreign exchange market.
Nigeria’s external reserves fell by 7.21 percent in a single year, from $35.31 billion as of April 20, 2023, to $32.763 billion on May 22, 2024. These reserves provide the CBN with the strength to defend the naira.
Several issues, including the high need for foreign exchange to cover the costs of goods imports and services, low trust, limited investment inflows, and low sales of crude oil due to oil theft, all contribute to the pressure on external reserves.
