Naira Hits New Low Against the Dollar
The Nigerian Naira faced a significant decline, hitting a new low on Thursday, December 28th, 2023, closing at N1,043.09 per dollar in the official market. This represents a 16.35% depreciation from its previous closing rate, raising concerns just days before the new year.
This is the second time the Naira has crossed the N1,000/$ threshold, indicating a substantial depreciation and prompting worries about its impact on the economy. The first occurrence was on Friday, December 8th, 2023, when it reached a historic low of N1,099.05 per dollar in the official market, marking a significant turning point for the currency.
Despite efforts by the Central Bank of Nigeria (CBN) to stabilize the foreign exchange market, the Naira’s downward trend persists, leading to concerns about its impact on the upcoming New Year, a period associated with increased consumer spending and reliance on imported goods. This development is likely to exacerbate existing inflationary pressures and strain household budgets, particularly for those reliant on imported products.
The implications for businesses, both large and small, are substantial, with potential increases in production costs and challenges in maintaining profitability. The Naira’s depreciation has been notable, closing at N1,043.09 to a dollar at the end of the trading day, reflecting a 16.35% decline compared to the previous day’s close at N872.59.
Data from the official Nigerian Autonomous Foreign Exchange Market (NAFEM) revealed an intraday high of N1235.65/$1 and an intraday low of N720/$1, indicating a significant spread. Despite a marginal appreciation in the parallel forex market, where it was quoted at N1220/$1, concerns remain regarding the forex scarcity.
The CBN’s recent extension of the timeline for issuing letters of credit from 24 hours to five working days reflects ongoing struggles with forex scarcity. This extension, along with others like the registration of Form M and NXP, aims to manage the forex crisis but may impact trade and business operations.
Financial experts have suggested strategies for the Naira to regain strength, including de-dollarizing the economy by making local transactions in US dollars illegal and selling crude oil to local refineries in Naira rather than dollars. These measures aim to address the challenges posed by the Naira’s depreciation and stabilize the forex market.
In conclusion, the Naira’s recent decline raises concerns about its impact on the economy and businesses. The CBN’s efforts to address the forex crisis continue, but there is a need for comprehensive strategies to stabilize the currency and mitigate its effects on the economy.
Source: Nairametrics
