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JUST IN: Naira’s Depreciation Persists Despite Central Bank’s Intervention
JUST IN: Naira’s Depreciation Persists Despite Central Bank’s Intervention....KINDLY READ THE FULL STORY HERE▶
The Nigerian naira has recently undergone a substantial devaluation of 26.36 percent against the US dollar within the official Investor and Exporter window of the foreign exchange market……CONTINUE READING
This devaluation comes in the wake of the Central Bank of Nigeria’s (CBN) announcement that it successfully cleared $2 billion from its backlog of forward contract obligations, including a disbursement of $61.64 million to foreign airlines.
Hakama Sidi Alia, the CBN’s Acting Director of Corporate Communications, highlighted that these payments form part of a continuous effort to settle valid forward transactions, aiming to alleviate pressure on the exchange rate. Alia expressed optimism that this initiative would fortify the naira and instill confidence among investors in the Nigerian economy.
However, despite these measures, the naira concluded trading at N856.57/$ on Monday and further depreciated to N1082.32/$ by Wednesday, according to data from the FMDQ Securities Exchange. This marks the fifth occasion the naira has closed above N1000 since the removal of the rate cap on the currency by the CBN.
The ongoing depreciation of the naira persists despite attempts to enhance liquidity in the foreign exchange market. The Minister of Finance and Coordinating Minister of Economy, Wale Edun, revealed the acquisition of a $2.25 billion foreign exchange support facility from the African Import-Export Bank. This facility, part of a $3.3 billion agreement, aims to address foreign exchange shortages in the economy.
Dr. Ayo Teriba, CEO of Economic Associates, attributed the naira’s volatility to insufficient foreign exchange supply and emphasized the necessity of fostering openness to investors to bolster reserves and meet the demand in the FX market.
On a more optimistic note, Prof. Adeola Adenikinju, the President of the Nigerian Economic Society, predicts increased stability for the naira in 2024, contingent on improvements in local refinery operations, revenue generation, and oil production. He anticipates a potential stabilization of the naira around N900/$ by the end of the year.
However, the Financial Derivatives Company warns of continued pressure on the naira in 2024, with the CBN having limited capacity to defend the currency. They predict a potential decline to N1,350/$ before a rebound in the second quarter of 2024.
In summary, these developments paint a challenging trajectory for the Nigerian currency, with experts offering varied strategies and outcomes for the naira in the months ahead.
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