Naira Drops to Record Low Against Dollar, Stirring Economic Concerns

On Monday, the Nigerian Autonomous Foreign Exchange Market witnessed a significant downturn as the national currency, the naira, plunged to an unprecedented low of N1,534 against the US dollar. This latest development represents a staggering 3.93 percent decline, marking a loss of N58 compared to the N1,476.13/$ rate recorded at the close of trading last week Friday, according to data from FMDQ Exchange, the platform responsible for publishing official foreign exchange trading in Nigeria.

This alarming depreciation marks the lowest official exchange rate recorded since the Central Bank of Nigeria adopted a floating exchange rate system in June 2023. Meanwhile, in the parallel market, the naira was seen trading within the range of N1,480 to N1,490, suggesting a continued trend of higher rates compared to the official market, especially following recent adjustments made by the FMDQ in its methodology for calculating the official exchange rate.

The revision in methodology had already resulted in the naira’s depreciation from over 900/dollar to over 1,400/dollar in recent months. Notably, in December, the naira breached the N1000/$ mark on the official window, hitting an all-time low of N1,099.05/$ on December 8, 2023. Subsequent declines saw the naira closing at N1,043.09/$ on December 28, 2023, and N1,035.12/$ on January 3, 2024. The downward trend persisted, with the naira reaching N1,089.51/$ on January 9, 2024, and N1,082.32/$ on January 10, 2024. The situation worsened on January 30, 2024, when the naira plummeted to an unprecedented low of N1,348.63/$ following the FMDQ’s methodology review.

Amidst these economic challenges, dollar sales by banks plummeted by 56.58 percent to $253.77 million on Friday from a peak of $584.53 million on the first trading day after the CBN instructed banks to offload excess dollars in the official FX market. Commercial banks collectively sold a total of $1.97 billion within one week, reflecting the ongoing volatility in the forex market.

Currency traders in Abuja, popularly known as Bureau De Change operators, quoted buying rates for the greenback ranging between N1,480 and N1,490, with selling prices at N1,500 and N1,503, resulting in a profit margin of N23. Mallam Yahu, a BDC operator in Wuse, affirmed the prevailing rates, indicating the ongoing challenges faced by traders amidst the currency fluctuations.