Naira's Rapid Depreciation Persists: NAFEM Reports Closing Rate of N956.33/$

In a concerning trend, the naira experienced a significant downturn, reaching N956.33 per dollar in the official market and N1165 per dollar in the parallel market on Thursday.

 

At the close of business on Thursday, data from the official Nigerian Foreign Exchange Market (NAFEM) indicated a 12.11% depreciation in the domestic currency, closing at N956.33 to a dollar. This marks a substantial N115.8 loss or a 12.11% decline compared to the previous day's closing rate of N840.53. Notably, this stands as a new all-time low, surpassing the previous record of N996.75 set on November 9th.

 

The intraday trading saw a high of N1136/$1 and a low of N615/$1, reflecting a considerable spread of N521/$1. Forex turnover at the close of trading, as reported by the official NAFEM window, amounted to $105.50 million, indicating a 46.77% decrease compared to the previous day.

 

Concurrently, in the unofficial parallel forex market, where forex transactions occur unofficially, the naira weakened further. The exchange rate depreciated by 1.29%, quoted at N1165/$1, while peer-to-peer traders quoted around N1148.44/$1.

 

Financial experts are expressing concerns about the escalating depreciation of the naira in both the official and unofficial markets. Some experts, including Dr. Biodun Adedipe, the founder and chief consultant of B. Adedipe Associates Limited (BAA Consult), are urging the Central Bank of Nigeria (CBN) to take decisive actions to stabilize the situation.

 

Dr. Adedipe suggests strategies for the naira to regain strength, emphasizing the need for the CBN to de-dollarize the economy. He proposes declaring any local transactions in US dollars illegal and calls for transparent dealings with participating banks at the I&E Window. Additionally, he advocates for the sale of crude oil to local refineries to be conducted in Naira instead of dollars.

 

In his words, "CBN should deal transparently with participating banks at the I&E Window. De-dollarize the economy by declaring as illegal any local transactions in US dollars and ensure that government agencies stop charging local operators and entities in US dollars."

 

Furthermore, he recommends a direct engagement between President Bola Tinubu and bank CEOs to generate ideas and garner support for market reforms. Dr. Adedipe emphasizes the importance of facing the reality that unified exchange rates, akin to floating the Naira, might not be a prudent policy choice for a structurally defective and weak economy.

 

In the face of the current economic challenges, these recommendations aim to provide a foundation for potential solutions to curb the naira's free fall and promote stability in the foreign exchange market.