The Nigerian naira witnessed a notable decline in both the official and parallel foreign exchange markets, raising fresh concerns about the country’s economic stability and highlighting persistent challenges in its forex landscape.
At the parallel market, the national currency depreciated to N1,670/$ from N1,600/$, while it closed at an official rate of N1,537/$ on Friday compared to N1,498/$ recorded the previous day. This widening gap of N133 between the official and parallel market rates has raised concerns about potential round-tripping activities.
Despite efforts to boost liquidity through increased dollar supply totaling $3.83 billion in eleven days via the Nigerian Autonomous Foreign Exchange by Deposit Money Banks, the naira continued to depreciate. This increased liquidity was prompted by a directive from the Central Bank of Nigeria (CBN) urging banks to sell their excess dollar stock to improve liquidity in the FX market.
Data from the FMDQ Securities Exchange revealed that commercial banks, the CBN, and international oil firms were major sellers of forex at the Nigerian Autonomous Foreign Exchange Market (NAFEM). However, the increased liquidity did not prevent the naira’s decline, indicating persistent demand pressures.
Recent initiatives by the Apex bank to boost forex supply, including guidelines to curb hoarding and round-tripping, still face challenges despite restrictions on Personal Travel Allowance payments and revisions to export and import guidelines.
Meanwhile, Dele Oye, the National President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), called on the government to intensify efforts to address economic challenges.
Oye emphasized the importance of a stable currency in making agricultural inputs more affordable and boosting consumer purchasing power. He urged the government to implement robust economic policies aimed at stabilizing the naira and facilitating access to low-interest loans for farmers to enhance local food production.
Furthermore, Oye commended recent resolutions by President Bola Ahmed Tinubu and state governors to prioritize and boost local food production as a strategy to achieve food security and improve livelihoods. However, he highlighted the multifaceted nature of rising food costs, linking it to the depreciating value of the naira.
In conclusion, while efforts to stabilize the naira and promote local food production are commendable, addressing complex challenges in the forex market and agricultural sector requires sustained policy interventions and collaboration between the government, stakeholders, and regulatory bodies.
We have entered one chance!