Nigeria’s currency is currently under fresh demand pressure in the parallel market, experiencing significant depreciation over the past week.
As of yesterday, parallel market dealers reported a trading rate of N1,705 to $1.00, down from N1,655 to $1.00 just a week earlier. This consistent decline marks a departure from the more stable fluctuations within a narrow band of N1,645 to N1,655 to $1.00 observed over the past two months.
Market sources have indicated that supply shortages in recent weeks may be contributing to this depreciation.
The effects of this trend are also visible in the official market, with data from the FMDQ showing that the indicative exchange rate for the Nigeria Autonomous Foreign Exchange Market, NAFEM, fell to N1,541.94 to $1.00 yesterday, down from N1,540.78 to $1.00 over the weekend, representing a decline of 96 kobo.
The exchange rate developments in the third quarter of 2024 reveal a reversal of the positive trend seen at the end of the previous year. The Naira ended 2023 in the parallel market at N1,215 to $1.00, after peaking at N1,800 to $1.00 during the third quarter of that year.
The local currency began 2024 positively, appreciating to N1,220 to $1.00. However, this trend shifted in the second quarter, leading to a steady depreciation that resulted in an average rate of N1,620 to $1.00 by the end of that quarter.
Following two months of stability around N1,630 to $1.00 during much of the third quarter, the latest wave of depreciation raises concerns that the Naira may be on track to repeat the significant declines witnessed in the fourth quarter of 2023.
(Vanguard)
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