Nigeria’s currency, the Naira, experienced a decline against the United States dollar on Thursday due to heightened demand from importers and travelers, compounded by a scarcity of the greenback in the parallel market, according to traders. The exchange rate at the unofficial market stood at N762 per dollar, marking a 0.26 percent decrease compared to the N760 per dollar rate observed on Tuesday.
Meanwhile, at the Investors and Exporters (I&E) forex window, which represents Nigeria’s official market, the Naira managed a modest appreciation of 0.23 percent. The dollar was quoted at N463.33 on Wednesday, surpassing the previous closing rate of N464.42 on Tuesday. During the market auction, most foreign exchange dealers submitted bids ranging between N460.00 (low) and N632.00 (high) per dollar.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), which convened in Abuja earlier this week, expressed concern over the persistently high import bills that continue to exert pressure on the foreign exchange market. This pressure has subsequently contributed to an increase in the general price level within the economy. In light of these challenges, the Committee emphasized the need to bolster foreign reserves as a safeguard against economic shocks.
Remarkably, the Naira’s official exchange rate against the dollar has experienced a significant depreciation of 57.26 percent since President Muhammadu Buhari assumed office eight years ago. At the Central Bank of Nigeria’s official window, the Naira weakened to N461 per dollar as of May 23, 2023, compared to N197 per dollar in 2015.
Similarly, at the parallel market, the Naira has depreciated by 38.97 percent, reaching N762 per dollar as of Thursday, May 25, 2023, compared to N465 per dollar in 2016.
Aisha Ahmad, the CBN’s deputy governor in charge of financial system stability, acknowledged the impact of exchange rate pressures on domestic price levels, underscoring the importance of the central bank’s foreign exchange policies. These policies include initiatives such as the non-oil FX Rebate Scheme, Race to US$200 billion in FX repatriation, Naira4-dollar, and other measures aimed at attracting diaspora remittances, enhancing liquidity in the foreign exchange market, and strengthening external reserves.
As of March 16, 2023, Nigeria’s external reserves stood at US$35.35 billion, which is sufficient to finance 6.02 months of imports of goods and services, or 8.54 months of imports of goods alone.
Aisha Ahmad highlighted the challenges of maintaining exchange rate stability in the face of global headwinds, macroeconomic uncertainties, and persistent foreign exchange demand pressures. She emphasized that achieving stability remains a key challenge for monetary policy.
According to data from the CBN’s website, Nigeria’s foreign exchange reserves have declined to $35.18 billion as of May 23, 2023.
As the Nigerian economy grapples with the impact of import bills, foreign exchange pressures, and efforts to enhance economic stability, the authorities will continue to monitor the situation and implement appropriate measures to ensure a resilient and robust economy in the face of ongoing challenges.
