The Central Bank of Nigeria (CBN) recently adjusted some foreign exchange (FX) policies in a bid to boost supply, but the Naira, Nigeria’s currency, fell by 3.1 percent against the US dollar as dollar sales by banks saw a steady decline. This decline occurred one week after the CBN’s FX policy announcement. The sales dropped by 56.58 percent, totaling $253.77 million on Friday, down from the peak of $584.53 million on Monday, the first trading day after the CBN’s directive.
Despite the Naira’s earlier appreciation following the FX policy announcement, it lost 3.41 percent of its value against the dollar over the five trading days in the week at the official market. However, at the foreign exchange market’s close on Friday, the Naira appreciated slightly against the dollar, strengthening by 0.71% to close at N1,469.97 to a dollar. This gain contrasts with the ongoing demand pressure that has continued to erode the value of Nigeria’s currency.
At the parallel market, the Naira dropped to N1,490 per Dollar on Friday from N1,440 on Thursday, indicating fluctuation and volatility in its value. Despite the slight gain against the US dollar, the Naira remains N50 lower compared to the exchange rate at the beginning of the trading week, when it was at N1419.86. Additionally, in the cryptocurrency market where forex is sold using stablecoins, the rate reached N1,485/$1, emphasizing the challenges faced in stabilizing the exchange rate.
The decline in dollar sales by banks highlights concerns about exchange rate stability. Despite assurances from the Central Bank of Nigeria Governor, Olayemi Cardoso, of exchange rate stability at a session with the Senate Joint Committee on Banking, Insurance, and Financial Institutions, concerns persist about the sustainability of the Naira’s value in the face of ongoing demand pressures.
The data from the FMDQ Exchange indicated a cumulative total of $1.97 billion sold by commercial banks in one week, emphasizing the impact of the changes in FX policies on dollar sales. However, the ongoing decline in dollar sales raises questions about the effectiveness of the CBN’s strategies in boosting supply and stabilizing the Naira.
The ongoing demand pressure and the erosion of the Naira’s value, despite the implementation of various policies designed to enhance the supply of foreign exchange, underscore the challenges faced in maintaining the stability of the exchange rate. As the Central Bank of Nigeria continues its efforts to address these challenges, close monitoring of the Naira’s performance in the forex market remains crucial for stakeholders and investors alike.
