After hitting N1,740/$1 in the parallel market at the end of trading last weekend, the local currency in Nigeria is poised to reverse its gains as the depreciation trend reaches a new high. Nonetheless, the Naira is still stable and has slightly appreciated on the Nigerian Autonomous Foreign Currency Market (NAFEM), as traders predict that the Central Bank of Nigeria (CBN) will soon step in to relieve pressure on the currency rate.
Data from FMDQ showed that the indicative exchange rate for NAFEM fell to N1,600 per dollar from N1,601.2 per dollar on Thursday, indicating N1.2 appreciation for the naira. Dealers who spoke to Financial Vanguard at the weekend said they expect the exchange rate to close this month around N1,750/$1, while 2024 may end at over N1,800/$1. If this trend continues, by the end of the year, the local currency will have wiped out the gains it made in March this year when it suddenly appreciated massively.
Analysts and dealers blamed the sustained depreciation of the local currency on supply shortages. However, fiscal and monetary authorities in divergent tunes appear to be seeing the problem differently. At the last Monetary Policy Committee (MPC) meeting, the Governor of the CBN, Mr. Yemi Cardoso, who doubles as the MPC Chairman, stated that members of the MPC had noticed a correlation between the period of FAAC disbursement and demand pressures in the foreign exchange market. He stated that the apex bank will monitor future FAAC allocation disbursement to determine the impact on the FX market.
Financial dealers have said the acute shortage amidst demand pressures has shifted the exchange rate near the Central Bank of Nigeria’s (CBN) “fear index,” which they believe would compel the apex bank to launch emergency defensive measures, including raising the volume of supply intervention involving all dealers to boost FX liquidity.
