Nigeria’s currency, the naira, is facing a severe decline, losing a staggering N106.7 against the dollar within just 48 hours at the official foreign exchange market. This steep drop comes as Nigeria continues to grapple with foreign exchange (FX) shortages, causing further depreciation of the naira.
On Wednesday, October 16, the naira exchanged at N1659.69 per dollar, down from N1658.97 the previous day. While this daily loss of N0.72 may seem small, it marks a continued downward trend for the Nigerian currency. On Tuesday, the naira suffered a massive blow, dropping by N106.05 in a single day.
This sustained depreciation highlights the ongoing challenges Nigeria faces in stabilizing its currency amidst fluctuating FX supply. The naira’s performance remains a point of concern for the country’s economy, as the currency struggles to find its footing in a market marked by high demand for dollars and limited supply.
The Worst-Performing Currency in Africa?
According to data from the World Bank, the naira has become one of the worst-performing currencies in Africa. This unfortunate position has led to increased pressure on the Central Bank of Nigeria (CBN) to act swiftly in restoring confidence in the nation’s currency. However, despite various interventions, the naira’s value has continued to slide.
Nigeria’s FX market is known for its volatility, but the current decline has alarmed both financial experts and everyday citizens. For many, the falling naira means higher costs of living, as imported goods become more expensive and inflation continues to rise. The country’s reliance on imported products, especially fuel, has made the situation even more challenging for businesses and consumers alike.
The naira did see a brief moment of stability earlier in the week, gaining some ground on Monday. However, this was short-lived as the currency immediately resumed its decline on Tuesday and Wednesday.
The Central Bank of Nigeria has taken several steps to manage the situation, including interventions in the FX market to boost dollar supply. However, these efforts have done little to stem the tide of depreciation. The gap between the official exchange rate and the parallel market rate continues to widen, making it more difficult for businesses and individuals to access foreign exchange at affordable rates.
Yemi Cardoso, the newly appointed Governor of the CBN, spoke on the matter during a meeting with the House of Representatives Committee on Banking Regulations. Cardoso reassured lawmakers that Nigeria’s external reserves are still strong, standing at $39.12 billion. He expressed optimism that these reserves would provide a buffer to help stabilize the naira in the coming months.
“Our external reserves remain adequate, and we are working tirelessly to ensure stability in the foreign exchange market,” Cardoso said. He also noted that the CBN would continue to monitor the situation closely and intervene where necessary to protect the naira from further depreciation.
Despite these assurances, many Nigerians remain skeptical about the CBN’s ability to reverse the current trend. The FX market has been under immense pressure, with the demand for dollars far exceeding supply. This has been further compounded by external factors such as global oil prices and inflation in key trading partners like the United States and Europe.
Several global factors are contributing to the naira’s depreciation. One of the most significant is Nigeria’s heavy reliance on oil exports, which account for more than 90% of the country’s foreign exchange earnings. As oil prices fluctuate, so does Nigeria’s FX supply, making the naira vulnerable to external shocks.
In recent months, global oil prices have been volatile due to geopolitical tensions and supply chain disruptions. As a result, Nigeria’s ability to generate foreign exchange from oil exports has been severely impacted, further reducing the availability of dollars in the FX market.
Additionally, inflation in major economies like the United States has pushed the value of the dollar higher, making it more expensive for countries like Nigeria to import goods and services. This has created a vicious cycle where the naira continues to weaken, leading to higher import costs and even more pressure on the currency.
The impact of these external factors is compounded by Nigeria’s own economic challenges, including high inflation rates, a growing population, and an over-dependence on imports. These issues have made it difficult for the country to maintain a stable exchange rate.
The naira’s depreciation has had a direct impact on the everyday lives of Nigerians. As the currency weakens, the prices of imported goods, including food, electronics, and fuel, have skyrocketed. This has led to increased inflation, making it harder for families to make ends meet.
Transportation costs, in particular, have risen sharply due to the rising cost of fuel. Many Nigerians rely on petrol-powered vehicles for both personal and commercial transportation, and the high cost of fuel has trickled down to consumers in the form of higher fares and delivery costs. This, in turn, has affected the prices of food and other essential goods, pushing many families into financial hardship.
