The Nigerian currency – the Naira – experienced a 44% decline year-on-year, trading on Tuesday morning at N1,640 from N918 to the USD ($) as of September 1, 2023. Strong dollar demand pressure has been responsible, since government floated the currency last year.
To put it in perspective, the Naira devalued N5 daily since September 2023, highlighting the volatile nature of the Nigerian foreign exchange market. However, the Naira managed to make a slight recovery on Monday, kicking off the first trading day of September on a positive note, gaining ground across the foreign exchange market despite a decline in the dollar supply.
The supply of dollars was at its lowest ebb in 18 trading days. This drop of 58.81% brought the supply down to $71.18 million on Monday, starkly contrasting the $172.80 million recorded on Friday at The Nigerian Autonomous Foreign Exchange Market, NAFEM.
Last week, the Naira depreciated by 1.78% against the US Dollar, ending at N1,598.56/US$1 at the NAFEM window. This brought its year-to-date depreciation to 43.25%, up from 42.23% the previous week. In the parallel market, the Naira also weakened by 1.22%
Total inflows through the NAFEM window reached US$403.00 million, primarily driven by non-bank corporates and exporters/importers. However, these inflows were insufficient to counterbalance the high demand for dollars, pushing the exchange rate downward.
The decline in currency value comes at a time of rising energy costs, and even petrol scarcity, placing additional financial strain on many Nigerians.
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