The Nigerian Naira was strengthened against the US dollar on Monday, closing the official trading window at 1,339.33/$, a notable 9.68% increase from its Friday value of 1,482.81/$.
This marked a substantial fortune for the Naira, which has been under significant pressure in recent times.
Data provided by FMDQ, the platform for the Nigerian Autonomous Foreign Exchange Market, revealed a significant decrease in daily turnover on Monday. The turnover dropped from $556.25m on Friday to $180.80m on Monday, a sharp decline of 67.50%. This dip in trading activity came in tandem with the Naira’s sudden appreciation against the US dollar.
The Nigerian Naira’s movement against the US dollar at the official market saw a wide range on Monday. The currency traded at an intraday high of N1,501 and an intraday low of N1,310, indicating significant volatility in its value throughout the day.
On the parallel market, the Nigerian Naira experienced a mild devaluation against the US dollar on Monday, with the currency being traded at N1,520 compared to N1,500 on Friday. This represented a 1.32% drop in the Naira’s value, reflecting the ongoing fluctuations in the black market exchange rate.
After several weeks of deterioration, the Nigerian Naira recovered slightly against the US dollar on Friday, closing the official forex market unchanged from the previous day. Central Bank of Nigeria Governor Olayemi Cardoso described this development as a temporary “seasonal fluctuation” that should not be considered indicative of a broader trend in the currency’s value.
In his address at the post-Monetary Policy Committee meeting press briefing held in Abuja last Tuesday, Olayemi Cardoso, Governor of the Central Bank of Nigeria, made these comments about the temporary nature of the Naira’s recovery in the official foreign exchange market.
Cardoso stated “Members further observed the recent volatility in the foreign exchange market, attributing this to seasonal demand, a reflection of the interplay between demand and supply freely functioning market system.”
In addition to the Naira’s modest recovery against the dollar on the official forex market, recent CBN data revealed a significant decline in demand for foreign exchange. Compared to the same period a year ago, individual and corporate requests for forex to facilitate importation and other foreign exchange-related activities decreased by 42%, signaling a possible shift in the country’s currency flow dynamics
An analysis of the total sectoral utilisation of foreign exchange revealed that 19 sectors and services received $21.12bn forex allocation in 2023.
The 42% decrease in foreign exchange demand is a substantial reduction when compared to the previous year’s figure. In fact, the $21.11bn total disbursed to industry players in the first quarter of 2023 represents a 41.9% or $8.87bn decline from the $29.98bn disbursed in 2022, according to the quarterly statistics report published by the Central Bank of Nigeria.
