Naira falls to a three-week low on the official market at N1,488.60/$1

On Wednesday, June 5, 2024, the naira fell to its lowest level on the official market in three weeks.

The most recent data from the FMDQ Securities Exchange shows that the naira fell by 0.78% on the NAFEM window, closing at N1,488.60/$1.

Volatile foreign exchange market

The recent little decline in the value of the naira confirms the significant volatility of the local currency. The trajectory of the naira has been volatile during the last three weeks.

After appreciating by 14.09%, the naira reached its strongest level in the previous three weeks on May 27, trading at N 1,173.88/$.

The gains, though, were fleeting as the currency declined once more very rapidly. The stark difference draws attention to how volatile the currency is when faced with economic difficulties.

In addition to the decline in value, today’s foreign exchange (FX) turnover rate was recorded at $205.43 million, down 13.32% from the day before.

When combined with the naira’s decline, this decline in the FX turnover rate could indicate that traders and investors are losing faith in the stability of the currency. 

Things To Note

Policymakers and businesses alike face additional hurdles as a result of the depreciation of the naira, given Nigeria’s numerous economic challenges.

The volatility of the currency may raise the price of imported goods and services, which could raise inflation.

Nonetheless, the government and the Central Bank of Nigeria (CBN) have been working to increase naira value and market FX liquidity.

As a means of controlling inflation and keeping the naira stable, the top bank has stuck to a strict monetary policy. 

International Oil Companies (IOCs) can now sell approved currency dealers the remaining 50% of their repatriated export proceeds, according to a recent announcement from the bank.The latest directive from the CBN is expected to have a big effect on the Nigerian foreign exchange market. The order aims to increase forex liquidity by permitting IOCs to sell a significant amount of their repatriated revenues, so mitigating volatility and promoting a more stable economic climate.

These attempts have been hampered, meanwhile, by the ongoing need for foreign cash and the pressure that this has placed on the naira. 

Thus, in terms of finances, President Bola Ahmed Tinubu intends to issue an executive order to stop paying taxes and levies in foreign currencies. The decree also requires all levels of government and their agencies to give priority to buying goods and services that are Made in Nigeria in order to depress the value of the naira.

Prior to this, Fitch Ratings stated that in order to increase foreign direct investment (FDI) and foreign portfolio investment (FPI), ongoing foreign currency (FX) reforms are required. Nigeria’s current account (CA) would be bolstered by growing oil refining capacity, according to a presentation made on Monday by Gaimin Nonyane, Director of Sovereigns at Fitch. However, the reforms remain extremely important in luring in international investors.