Naira falls to N1,089/$ at official forex market

The naira fell to N1089.51/$ on the official Investor and Exporter window on Tuesday.

The currency fell by 27.19 per cent from the N856.57/$ it closed on Monday, according to data from the FMDQ Securities Exchange.

On Tuesday, the naira opened trading at N922.22/$, rose to a high of N1251/$ and low of N720/$ before closing at N1089.51/$.

Total forex turnover on the day was $97.45m.

This is the fourth time the naira will close below N1,000 on the official window.

On December 8, 2023, the naira fell to an all-time low of N1,099.05/$, on December 28, 2023, it closed trading at N1043.09/$, on January 3, 2024, the national currency closed at N1035.12/$.

Tuesday’s N1089.51/$ is the second lowest the naira has closed on the official FX window since the Central Bank of Nigeria removed the rate cap of the currency.

The naira’s continued decline is despite the apex bank’s effort to clear backlogs of matured foreign exchange obligations to the Deposit Money Banks. Recently, the CBN stated that it has paid $2bn as part of its backlog obligations.

Reports estimate that the bank is owing $7bn as forward contract obligations. The CBN disclosed this when it revealed it has disbursed $61.64m to foreign airlines as part of matured foreign exchange owed to them.

The CBN Acting Director of Corporate Communications, Hakama Alia, said, “These payments signify the CBN’s ongoing efforts to settle all remaining valid forward transactions, to alleviate the current pressure on the country’s exchange rate.

“It is anticipated that this initiative by the CBN should provide a considerable boost to the Naira hug against other major world currencies and further increase investor confidence in the Nigeria economy.”

Also, this current depreciation of the naira against the dollar is in the face of the government’s renewed effort to boost liquidity in the foreign exchange market.

At the end of 2023, the Minister of Finance and Coordinating Minister of Economy, Wale Edun disclosed that the Federal Government had received a $2.25bn foreign exchange support facility from the African Import-Export Bank.

According to the minister, the first tranche of its $3.3bn facility from the bank is aimed at resolving FX shortages in the economy.

Commenting on the issue, the Chief Executive Officer, Economic Associates, Dr Ayo Teriba, noted that the volatility of the naira is because of inadequate foreign exchange supply.

He said, “Reserves are low and declining, the CBN is known to be in arrears on some of its obligations. It has started clearing its arrears and has pledged to clear all of it in due course.”

He stated that the government has been making efforts to boost FX supply through investments, but these are yet to materialise, yet.

He declared, “I am optimistic that if the government can walk their thought about opening to investors, we would get the forex to boost reserves and meet the demand in the FX market, and the naira would stabilise. I want to see the N1000/$ as a reflection of FX shortages. I want to hope that Nigeria will in the next few weeks take the right steps.

“We were to take the NNPC to the market last year, but it didn’t happen. These are things we can fast-track. Nigeria has options.”

Teriba highlighted that the recent inflow of $2.3bn as crude forwards won’t solve the country’s supply issues.

He added, “We need to put down enough access to attract foreign exchange inflows. The naira will stabilise, inflation will come down, growth will pick up, and the living standard will improve. If we do not act, the volatility will continue, and this will be a bottomless pit. We need to build a wall of reserves so that the FX market will improve.”