Naira plunges to 1082/$ despite CBN’s $2bn debt repayment
The official Investor and Exporter window of Nigeria's foreign exchange market has witnessed a 26.36% depreciation in the value of the naira against the US dollar since the Central Bank of Nigeria (CBN) cleared $2 billion as part of its backlog obligations. The CBN disclosed the payment of $2 billion from its forward contract obligations on Monday, aiming to alleviate pressure on the country's exchange rate. Despite this effort, the naira closed trading at N1082.32/$ on Wednesday, marking a 26.36% decline since Monday when it closed at N856.57/$. This is the fifth instance of the naira closing above N1000 against the dollar on the official window since the removal of the rate cap.
The CBN anticipates that its initiative to settle valid forward transactions will boost the naira against major currencies, fostering investor confidence in the Nigerian economy. However, the recent depreciation is attributed to inadequate foreign exchange supply, declining reserves, and the CBN being in arrears on some obligations. Although the government has received a $2.25 billion foreign exchange support facility, efforts to enhance foreign exchange supply through investments are yet to materialize.
Economists, including Dr. Ayo Teriba and Prof. Adeola Adenikinju, have differing views on the naira's stability in 2024. Teriba emphasizes the need for increased transparency to attract investors, while Adenikinju believes stability could be achieved with the onstream of local refineries, improved revenue generation, and increased oil production. The Financial Derivatives Company predicts continued pressure on the naira in 2024, suggesting a potential fall to N1,350/$ before a rebound in the second quarter.
The official Investor and Exporter window of Nigeria's foreign exchange market has witnessed a 26.36% depreciation in the value of the naira against the US dollar since the Central Bank of Nigeria (CBN) cleared $2 billion as part of its backlog obligations. The CBN disclosed the payment of $2 billion from its forward contract obligations on Monday, aiming to alleviate pressure on the country's exchange rate. Despite this effort, the naira closed trading at N1082.32/$ on Wednesday, marking a 26.36% decline since Monday when it closed at N856.57/$. This is the fifth instance of the naira closing above N1000 against the dollar on the official window since the removal of the rate cap.
The CBN anticipates that its initiative to settle valid forward transactions will boost the naira against major currencies, fostering investor confidence in the Nigerian economy. However, the recent depreciation is attributed to inadequate foreign exchange supply, declining reserves, and the CBN being in arrears on some obligations. Although the government has received a $2.25 billion foreign exchange support facility, efforts to enhance foreign exchange supply through investments are yet to materialize.
Economists, including Dr. Ayo Teriba and Prof. Adeola Adenikinju, have differing views on the naira's stability in 2024. Teriba emphasizes the need for increased transparency to attract investors, while Adenikinju believes stability could be achieved with the onstream of local refineries, improved revenue generation, and increased oil production. The Financial Derivatives Company predicts continued pressure on the naira in 2024, suggesting a potential fall to N1,350/$ before a rebound in the second quarter.
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