Naira Crashes Against US Dollar Across Markets Despite CBN Forex Intervention
- The Nigerian currency, the naira, has depreciated against the US dollar after several days of solid performance
- The drop occurs despite the CBN's decision to adopt a retail auction approach to help ease the pressure on the naira
- As a result, the gap between the unofficial and official market rates narrowed to N10.11 per dollar
Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the Stock Market.
On Friday, August 16, 2024, the naira weakened in the parallel market, dropping to N1,590 per dollar from Thursday’s rate of N1,585.
Similarly, in the Nigerian Autonomous Foreign Exchange Market (NAFEM), the naira fell to N1,579.89 per dollar.
Source: UGC
Naira continues to slide
According to FMDQ data, NAFEM's indicative exchange rate climbed to N1,579.89 per dollar, up from N1,564.4 per dollar the previous day, reflecting a depreciation of N15.49.
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The total dollar volume traded in the market also saw a 22.7% decline, decreasing to $115.23 million from Thursday’s $149.24 million.
As a result, the gap between the parallel market and NAFEM rates narrowed to N10.11 per dollar, compared to Thursday’s N20.52 per dollar.
Naira declined amid CBN's new forex policy
Earlier this week, the naira ended its over one-week winning streak against the US dollar on the official market when it weakened in value to N1,582.09/$1 on Tuesday, August 13, 2024.
The decline happened despite the Central Bank of Nigeria’s (CBN) sale of foreign exchange to authorized dealer banks last week through the Retail Dutch Auction System (rDAS).
The CBN adopted this auction model, which dates back to the 1980s, to address the country's increasing demand for foreign exchange.
Speaking on the recent naira crash, Uzo Nwachukwu, a forex trader, told Legit.ng that the factors working against the naira still persist.
He said:
"The recent decline of the naira against the US dollar reflects deepening economic challenges in Nigeria, driven by inflation, limited foreign reserves, and policy uncertainty. This has increased the cost of living and importation, adding pressure on businesses and consumers. Urgent reforms are needed to stabilize the currency and restore confidence."
Africa’s top 10 weakest currencies in 2024
In related news, Legit.ng earlier reported that exchange rate fluctuations, obstacles in local commerce, and weak investment are some challenges African countries face.
The development is due to currencies that perform below their intended value.
A weak currency can go beyond its direct economic consequences to undermine national pride and impact livelihoods.
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Source: Legit.ng
