The naira experienced further depreciation against the dollar by the end of trading on Wednesday, continuing its recent downward trend in the foreign exchange market. The latest figures reveal a significant decline in foreign exchange turnover, which fell by 54 percent from the previous day.
On Wednesday, foreign exchange transactions totaled $92 million, a sharp decrease from $201 million recorded the day before. This decline in turnover indicates a reduced level of trading activity and possibly a lack of liquidity in the market.
According to data from FMDQ, the naira weakened slightly to 1,586.04 per dollar on Wednesday. This compares to the rate of 1,582.09 per dollar that was recorded on Tuesday. The continuous depreciation of the naira reflects ongoing pressure in the foreign exchange market.
The drop in FX turnover and the weakening of the naira are concerning developments for the Nigerian economy. A lower turnover can indicate reduced confidence among traders or financial institutions, which might be due to various factors, including economic uncertainties or tighter currency controls.
This depreciation trend is part of a broader pattern observed in recent months. The naira has faced increasing pressure due to fluctuations in oil prices, changes in global economic conditions, and domestic economic policies. As Nigeria is heavily reliant on oil exports, any changes in oil prices can significantly impact the country’s foreign exchange reserves and currency value.
The Central Bank of Nigeria (CBN) plays a crucial role in stabilizing the naira by intervening in the forex market. However, challenges such as limited foreign exchange reserves and economic pressures can make these interventions less effective. The CBN’s ability to maintain a stable naira exchange rate is critical for the country’s economic stability and investor confidence.
In light of these developments, businesses and consumers are likely to experience increased costs for imported goods and services, which could lead to higher inflation rates. Importers may face challenges in managing their foreign exchange exposures, while consumers might feel the impact of rising prices on everyday goods.
