The exchange rate between the naira and the dollar closed the week at N1,466/$1, reaching a two-month low as a stronger dollar continues to outpace global currencies.
The exchange rate has now weakened by a significant 26.8% since reaching its strongest point of N1,072/$1 in April when it was declared the best performing currency by the apex bank.
The closing rate of N1,466/$1 marks the lowest level the naira has touched since March 20th, when it was at N1,492/$1. This confirms that all the gains recorded in April have been erased.
On April 17, the currency rate rose to a yearly high of N1,072/$1, giving many Nigerians faith that the central bank’s foreign exchange policies were working.
The Central Bank governor’s announcement at the IMF press briefing that there would be no defence of the naira in the wake of a decline in foreign reserves corresponded with this peak.
Closing rates for Friday
The closing exchange rate on Friday was N1,466/$1, the lowest since March 20th, 2024, according to data from FMDQ.
● The N1,490/$1 and N1,322/$1 intraday highs and lows, respectively, indicate that traders were getting close to the N1,500/$1 threshold.
● Additionally, the daily turnover increased to $113.7 million on Friday following a three-month low of $84 million on Thursday. May has seen the lowest average daily turnover since January, when it was $97 million. This figure is $149 million.
● The naira appreciated by mid-April, and March and April saw daily average turnovers of $252 million and $194 million, respectively.
● Meanwhile, evidence obtained from several BDC operators indicates that the naira is being quoted as low as N1,470/$1 in the unofficial parallel market.
According to some, the exchange rate may drop to N1,500 if demand continues.
We’re not defending the naira.
Central Bank Governor Yemi Cardoso stressed at the IMF that the drop in foreign reserves was not brought on by the central bank protecting the naira.
He went on to say that efforts to protect the naira were not the main cause of the declining foreign exchange (FX) reserves; rather, it was mostly due to debt repayments and other regular financial responsibilities.
“Defending any naira has little to do with the shift you see in our reserves, and that is definitely not our goal. Regarding the changes in our reserves, what you observe is the same as what happens in any reserve situation in any nation, for instance, when payments are due on obligations and must be met in order to maintain one’s credibility,” Cardoso said.
Additionally, he said that there were no plans to use external reserves to protect the currency in the future. He gave the explanation that this would be contradictory to the apex bank’s already-implemented willing buyer, willing seller policy.
The Central Bank Governor then declared on April 20th that their actions were to blame for the naira’s rise to the top of the global currency performance rankings.
“In April, the naira emerged as the best-performing currency globally, backed by optimistic sentiment from key foreign investment institutions. There is a lot going on in our FX market right now, with turnover at levels not seen in more than seven years. The increase in liquidity fosters trust among investors, enterprises, and other stakeholders, guaranteeing smoothness in their dealings with Nigeria’s foreign exchange markets,” Cardoso concluded.
Since then, though, the value of the naira has declined significantly compared to the dollar—by as much as 26.8%—making it one of the worst performing currencies globally in May.
Since the IMF Spring Meeting, the central bank has been silent on the currency rate while analysts speculate about the next move by the apex bank. In the meantime, interest rates on government assets are rising; the price of treasury bills at the most recent auction reached 20.7%.
