The Nigerian naira continued its alarming decline on the official investor and export window of the foreign exchange market, plummeting to N1482.57/$ on Tuesday. This significant drop marks a 9.93 percent decline from its N1348.63/$ rate on Monday, as reported by the FMDQ Securities Exchange.
While the naira remained stable at N1,450/$ on the parallel market, it traded for N1,439.5/$ on the cryptocurrency peer-to-peer market on Binance’s P2P platform at the time of reporting.
This new low on the official market is a clear indication of the national currency’s technical devaluation. On Monday, FMDQ Securities Exchange, responsible for calculating the exchange rate, revised its methodology, which experts have interpreted as a technical devaluation of the naira.
FMDQ’s market notice stated, “This revision aims to address recent fluctuations and challenges in the Nigerian Foreign Exchange Market.” The exchange highlighted its commitment to ensuring that NAFEX and NAFEM rates accurately reflect market conditions. The notice explained that the revisions are focused on enhancing the accuracy and reliability of the NAFEX and NAFEM rate determination processes.
In a related development, the Central Bank of Nigeria (CBN) issued a circular to authorised dealers concerning financial market price transparency. The CBN’s statement addressed concerns about dealers and customers reporting inaccurate and misleading information on transactions in the financial market, warning of sanctions for such market manipulation.
Despite efforts by the CBN and the Federal Government to boost liquidity in the foreign exchange market, the naira’s depreciation continues. The national currency is now approaching the N1,500/$ rate, as predicted by Johnson Chukwu, Group Managing Director of Cowry Asset Management Limited.
This devaluation is expected to lead to further price hikes, as highlighted by Francis Meshioye, president of the Manufacturers Association of Nigeria. According to a report from The PUNCH, Meshioye said, “It is not possible to remain profitable with this exchange rate… It means the prices of things will be higher.”
Meanwhile, the International Monetary Fund (IMF) believes that the naira has yet to find its fair value against the dollar. Dr. Christian Ebeke, Nigeria’s Country Representative for the IMF, commented, “There is uncertainty in the market… It is very difficult while still in the transition phase to talk about what is a fair value.”
As the naira faces continued instability, concerns mount over the potential economic impacts and the efficacy of regulatory measures in stabilizing the currency.
