On Monday, the Nigerian naira experienced a significant decline against the US dollar, falling to an average rate of 1,030 Naira per dollar in the parallel market.
This marked a loss of 80 Naira or an 8.42% decline compared to its closing rate of 950 Naira per dollar the previous week.
This depreciation comes as a setback after a brief period of stability following the Central Bank of Nigeria’s (CBN) efforts to clear a portion of its foreign exchange (FX) backlog.
According to currency traders, the naira was trading in a range between 990 Naira to 1,030 Naira per dollar.
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Aminu Gwadabe, the President of the Association of Bureaux De Change Operators of Nigeria, explained that the dollar gained strength against the naira as people who had previously acquired it at higher rates resisted its decline, likely in response to the CBN’s actions last week.
The CBN had commenced payments for overdue matured FX forwards to various banks to boost liquidity in the FX market, addressing weeks of the naira’s decline to record lows.
The outstanding forward payments amounted to approximately $6.7 billion, according to the Minister of Finance, Wale Edun.
This move initially led to an appreciation of the naira, with an increase of about 220 Naira, closing the week at 950 Naira per dollar in the parallel market.
However, the naira has now lost this momentum, closing at 1,030 Naira per dollar.
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“The only way we can continue to achieve the rate is by continuing to send confidence to the market. Tell the market that another window is opening, and boost liquidity. The parallel market is where the retail end is. And as of now, there is no information as to how liquidity will come into that sector. All we have is that BDCs will be included to advance the official foreign exchange market. We cannot wait in the FX market,” Gwadabe told the Punch.