The Nigerian Naira Hits Record Low Against the US Dollar
Naira Plummets in Official and Parallel Markets
The Nigerian Naira experienced a significant drop on Tuesday, hitting an all-time low against the US dollar in both official and parallel markets. According to data from FMDQ, the currency depreciated by 8.9% from Monday’s closing value, falling to N848.12/$1 from N778.80/$1 in the official market.
Forex Supply Surge Triggers Sharp Decline
This sharp decline was triggered by a 212% surge in forex supply, increasing from $43.09 million to $134.8 million. The intraday rates fluctuated between a high of N700.00 and a low of N981.00 before settling down.
Increased Demand and Dollar Shortage Drive Parallel Market Rates
Simultaneously, the Naira traded at N1,050/$1 in the parallel market, up from the previous rate of N1,040/$1. This increase in the unofficial rate to N1,060/$1 resulted from a shortage in dollar circulation and increased demand. The market margin between the official and parallel markets reached 24%, with a spread of N201.88.
80% Depreciation Since June 2023
Tuesday’s depreciation represents an 80% depreciation since June 13, 2023, before the radical forex reform of June 14. At that time, the Naira traded at N472/$1 and N768/$1 in the official and parallel markets, respectively.
Street Dealers Witness Surge in Activity Volume
Street currency dealers across Lagos sold the Naira between N1,040 to N1,049/$1, with an activity volume escalating to $234.28 million from $43.09 million recorded on Monday.
Central Bank Implements Managed Float Regime
The Central Bank of Nigeria (CBN) had previously indicated its plan to operate a “managed float” regime and intervene when necessary. Tuesday’s depreciation is seen as part of this apex bank’s deliberate act allowing a free float of the Naira to bridge the gap between official and parallel markets.
This article highlights the significant drop of the Nigerian Naira against the US dollar in both official and parallel markets. It discusses the factors behind the sharp decline, including a surge in forex supply and increased demand. Additionally, it mentions the depreciation trend since June 2023 and the Central Bank’s efforts to bridge the gap between the markets.