The Nigerian naira faced a decline against the U.S. dollar on Tuesday, reversing its gains from the previous day at both the official and parallel markets. Official market data from the Nigerian Autonomous Foreign Exchange Market (NAFEM) revealed a 9.73% depreciation, closing at N830.97 to a dollar by the end of Tuesday’s business activities.
This resulted in an N80.83 loss or a 9.73% decline compared to the previous day’s closing rate of N750.14. The intraday trading range exhibited a high of N1,121/$1 and a low of N600/$1, indicating a significant spread of N521/$1.
NAFEM data reported a 30.72% decrease in forex turnover, amounting to $122.46 million at the close of trading on Tuesday. In the parallel forex market, the naira depreciated by 0.44%, with an exchange rate quoted at N1140/$1, while peer-to-peer traders quoted approximately N1146.08/$1.
In response to challenges and in an effort to stabilize the exchange rate, the Central Bank of Nigeria (CBN) has implemented various measures, including raising interest rates and restricting access to foreign exchange. However, the efficacy of these measures remains uncertain.
Financial experts interviewed by Nairametrics emphasized the need for a comprehensive approach to address the forex crisis. They highlighted the importance of boosting domestic production, instilling market confidence, and implementing robust fiscal and monetary policies.
To alleviate forex demand, experts stressed the significance of enhancing domestic production, particularly in the petroleum sector. This involves optimizing private and public refineries to operate at full capacity, reducing dependence on imported petroleum products. Furthermore, fostering domestic manufacturing and agriculture would contribute to diminishing the need for foreign exchange to acquire essential goods.
Mr. David Adonri, the Executive Vice Chairman of Hicap Securities Limited, emphasized the role of security in facilitating domestic production and reducing import dependence, subsequently alleviating pressure on the naira. Adonri advocated for the implementation of appropriate fiscal measures to address supply gaps in the economy, asserting that monetary policy measures alone cannot curb inflation.
Regarding currency speculation, Adonri acknowledged its presence in deregulated economies but suggested that market-based solutions, driven by supply and demand dynamics, should be allowed to discourage speculators naturally. He cautioned against using administrative methods to discipline speculators, emphasizing the importance of market forces in shaping behavior.
