The Nigerian Naira continued its downward trend yesterday, experiencing a significant depreciation in both the parallel market and the Nigerian Autonomous Foreign Exchange Market (NAFEM).
In the parallel market, the Naira weakened to N1,610 per dollar, marking a N10 decline from Monday’s rate of N1,600 per dollar.
Similarly, in the NAFEM, the Naira’s value dropped to N1,592.06 per dollar, a depreciation of N12.84 from the previous day’s rate of N1,579.22 per dollar. This decline is indicative of the mounting pressure on the Naira amid ongoing economic challenges.
The foreign exchange market also witnessed a notable contraction in trade volumes. According to data from FMDQ, the total dollar turnover in NAFEM fell by 6.5 percent, decreasing to $152.26 million from Monday’s $162.99 million. This drop in volume reflects a shrinking liquidity in the market, further complicating efforts to stabilize the Naira.
Interestingly, despite the sharp depreciation, the margin between the parallel market and NAFEM rates narrowed. The gap decreased to N17.94 per dollar from N20.78 per dollar on Monday, indicating a slight convergence between the two markets. However, the overall picture remains concerning, with the Naira’s value under significant pressure across multiple exchange platforms.
Analysts suggest that the persistent depreciation could be attributed to a combination of factors, including reduced foreign exchange inflows, heightened demand for dollars, and prevailing economic uncertainties.
The decline in trading volume may also be a sign of market participants’ cautious approach in light of the Naira’s volatility.
As the Naira continues to struggle, all eyes will be on the Central Bank of Nigeria and other financial regulators for potential interventions to stabilize the currency and address the underlying issues driving the depreciation.