The naira closed the week at N927.19/$ on the official Investor and Exporter forex window.
This was a 16.64 per cent decline from the N794.89/$ it
closed the week that ended November 24, 2023, according to data from the FMDQ
Securities Exchange. Also, the turnover of dollars traded in the market
improved from $75.82m to $110.14m in the period under review.
On Friday, the naira began trading at N815.00/$ for the day
before hitting a high of N1160/$ and a low N701/$ within the day. It eventually
closed trading at N927.19/$.
Last week Friday, the naira traded at a high of N1136/$ and
a low of N700.00/$. The naira has continued to fall despite the Central Bank of
Nigeria’s attempt to clear a backlog of foreign exchange forward contracts.
Recently, the apex bank’s governor, Olayemi Cardoso, stated
that fiscal deficits and public debt increases are adding pressure to the
external reserves and contributing to exchange rate instability.
While commenting at the recent Chartered Institute of
Bankers of Nigeria 58th Annual Bankers’ Dinner and Grand Finale of the
Institute’s 60th Anniversary, the governor said, “We have already witnessed
improvements in FX market liquidity in recent weeks, as the market responded
positively to tranche payments which have been made to 31 banks to clear the
backlog of FX forward obligations.
“We have been subjecting these payments to detailed
verification to ensure only valid transactions are honored. In a properly functioning market, it is
reasonable to expect significant FX liquidity, with daily trade potentially
exceeding $1.0bn. We envision that, with discipline and focused commitment,
foreign exchange reserves can be rebuilt to comparable levels with similar
economies.”
He added that one of the bank’s monetary policies aims is to
achieve price stability and the stabilization of the exchange rate of the
naira. Cardoso highlighted that the proper functioning of domestic and foreign
currency markets, clear, transparent, and harmonised rules governing market
operations are essential.
He declared, “New foreign exchange guidelines and
legislation will be developed, and extensive consultations will be conducted
with banks and FX market operators before implementing any new requirements.”
However, the Economic Intelligence Unit, the research and
analysis division of the Economist Group, does not believe the CBN has the
required firepower to clear the backlog of foreign exchange orders.
In a recent report, it said, “In Nigeria, an unsupportive
monetary policy implies that the naira will remain under pressure, while the
central bank lacks the firepower to adequately supply the market or clear a
backlog of foreign exchange orders, which will keep foreign investors unnerved.
High inflation and a continued spread with the parallel market will leave the
exchange rate regime unstable and result in periodic devaluations.”