The Depreciation of the Nigerian Naira
The Naira’s Depreciation
The Nigerian Naira continues to experience significant depreciation, despite the Central Bank of Nigeria’s attempts to strengthen the local currency. The Naira’s value has been on a downward trajectory since June 2023, when forex reforms triggered the floating of the local currency from N471.67 per dollar, marking the beginning of its depreciation journey.
Official Forex Market
On Tuesday, November 7, 2023, in Zone 4 Abuja, the Naira was valued at 874.71 per US Dollar in the official FMDQ market. However, by Wednesday, November 8, it had dropped by 122.01 Naira to close at 996.75 per Dollar. This marked a significant depreciation on the official forex window since October 30, when the Naira traded at N993.82 per dollar.
Depreciation in NAFEM and Parallel Market
The situation worsened on Thursday, November 9, as the Naira plunged to an all-time low of N996.95 per dollar on the Nigerian Autonomous Foreign Exchange Market (NAFEM), nearing the parallel market rate of N1,175 per dollar. This represented a staggering 111% depreciation since June’s forex reform. In addition to this decline in the official market, the parallel market also saw further depreciation to 1140 Naira per Dollar from Wednesday’s 1100 Naira.
Government’s Efforts and Market Pressure
These rates remained stable into Friday, November 10. Despite a high turnover of $228.54 million and improved liquidity leading to a shrinking gap between official and parallel rates by 15% to N179 with N996.75 per dollar due to government’s policy to strengthen the Naira, pressure on the Naira remains high.
Impact of Black Market
This depreciation occurred following an attempt by the Central Bank of Nigeria to strengthen the Naira by clearing forex backlogs to commercial banks and airlines last week. However, street currency dealers, also known as the black market, have been accused of sabotaging these policies. Traders in Lagos report intense dollar demand outstripping supply, adding further pressure on the already struggling Naira.
