NAIRA DROPS TO N1089/$ ON OFFICIAL I&E WINDOW
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On Tuesday, the official investor and exporter window saw a drop in the value of the naira to N1089.51/$.
The currency dropped by 27.19 percent from its Monday closing value of N856.57/$, citing statistics from the FMDQ Securities Exchange.
The naira began trading on Tuesday at N922.22/$, reached a high of N1251/$ and a low of N720/$, and ended the day at N1089.51/$.
The day’s total FX turnover was $97.45 million.
The naira will fall below N1,000 in the official window for the fourth time this year.
On December 8, 2023, the naira fell to an all-time low of N1,099.05/$; on December 28, 2023, it closed trading at N1043.09/$; and on January 3, 2024, the national currency closed at N1035.12/$.
The naira closed at N1089.51/$ on Tuesday, the second-lowest level since the Central Bank of Nigeria lifted the currency’s exchange ceiling.
Notwithstanding the top bank’s efforts to pay down arrears of matured foreign exchange liabilities to the Deposit Money Banks, the naira is still declining. The CBN recently declared that it has fulfilled its backlog of obligations by paying $2 billion.
According to reports, the bank’s forward contract liabilities total $7 billion. This was revealed by the CBN when it reported that it had paid out $61.64 million to international airlines from matured foreign exchange that was owed to them.
The CBN Acting Director of Corporate Communications, Hakama Alia, said, “These payments signify the CBN’s ongoing efforts to settle all remaining valid forward transactions to alleviate the current pressure on the country’s exchange rate.
“It is anticipated that this initiative by the CBN should provide a considerable boost to the Naira against other major world currencies and further increase investor confidence in the Nigerian economy.”
Furthermore, the naira’s present devaluation versus the dollar is a result of the government’s intensified efforts to increase foreign exchange market liquidity.
At the end of 2023, the Minister of Finance and Coordinating Minister of Economy, Wale Edun disclosed that the Federal Government had received a $2.25 billion foreign exchange support facility from the African Import-Export Bank.
The minister claims that the goal of the bank’s initial $3.3 billion tranche is to address the economy’s FX shortages.
Reacting to the issue, the Chief Executive Officer of Economic Associates, Dr. Ayo Teriba, noted that the volatility of the naira is because of inadequate foreign exchange supply.
He said, “Reserves are low and declining; the CBN is known to be in arrears on some of its obligations. It has started clearing its arrears and has pledged to clear all of it in due course.”
He added that the government has been making efforts to boost FX supply through investments, but these are yet to materialize.
He declared, “I am optimistic that if the government can walk their thought about opening to investors, we would get the forex to boost reserves and meet the demand in the FX market, and the naira would stabilize. I want to see the N1000/$ as a reflection of FX shortages. I want to hope that Nigeria will, in the next few weeks, take the right steps.
“We were to take the NNPC to the market last year, but it didn’t happen. These are things we can fast-track. Nigeria has options.”
Teriba highlighted that the recent inflow of $2.3 billion as crude forwards won’t solve the country’s supply issues.
He added, “We need to put down enough access to attract foreign exchange inflows. The naira will stabilize, inflation will come down, growth will pick up, and the living standard will improve. If we do not act, the volatility will continue, and this will be a bottomless pit. We need to build a wall of reserves so that the FX market will improve.
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