By Milcah Tanimu
In a startling development, the Nigerian naira has experienced an unprecedented decline, reaching N1348.63 against the US dollar in the Nigerian Autonomous Foreign Exchange Market.
This alarming drop, reported on Monday, signifies a substantial 51.21% decrease from the closing rate of N891.90/$ recorded last Friday in the official market, as per data from the FMDQ Securities Exchange.
The current exchange rate represents the lowest point since the Central Bank of Nigeria (CBN) adopted a floating exchange rate system for the national currency in June 2023.
The naira’s decline has been persistent, breaching the N1000/$ milestone on the official window for the first time on December 8, 2023, and subsequently hitting new lows in the ensuing weeks and months.
Despite concerted efforts by the CBN and the Federal Government to enhance liquidity in the foreign exchange market, the naira continues its depreciation trend.
On the parallel market, the situation is equally concerning, with Bureau de Change Operators reporting a closing rate of N1,450/$ on Monday, a significant increase from N1,420/$ on Friday.
Traders Abdusallam Abubakar and Magaji Mohammed have confirmed the N1450/$ rate for dollar sales.
In the cryptocurrency peer-to-peer market, the naira was traded at N1,429/$ on Binance’s P2P platform. Nigeria, identified by blockchain firm Chainalysis, ranks among the countries with the highest peer-to-peer exchange volumes globally.
This depreciation unfolds despite recent actions by the CBN to clear forex backlogs, including payments of $500 million and $2 billion. Rumors circulate that the bank has a $7 billion FX backlog. CBN spokesperson Mrs. Hakama Sidi Ali in Abuja reiterated the bank’s commitment to settling these backlogs and improving cash flow in the FX markets.
CBN Governor Olayemi Cardoso acknowledged that the naira is presently undervalued and outlined the strategies employed by the CBN to address the situation.
However, the sustained depreciation of the naira is anticipated to have adverse effects on the prices of goods and services.