The naira, the indigenous currency of Nigeria, continued to weaken against the US dollar, which is currently the leading foreign currency, at the official foreign exchange market on Wednesday due to a prolonged supply of foreign exchange.
Data from the FMDQ, which provides daily spot prices, indicates that the exchange rate deteriorated by N7.04 (0.47%) to N1507.83 from N1500.83/$ as the Central Bank of Nigeria’s (CBN) willing buyer, willing seller FX concept was put to the test by rising demand for foreign money.
The nation’s exchange rate could be negatively impacted by a test run of the forex market with eager sellers and buyers. Nigeria is an import-dependent country; thus, the CBN cannot afford to let supply and demand dictate spot rates.
“For the foreseeable future, demand for the US dollar would almost always outpace the supply side because of its sole reliance on hydrocarbon sales for FX receipts,” a Nigerian economist who prefers not to be mentioned told MarketForces Africa.
The apex bank said this week the $24 billion FX inflows found its ways to the Nigerian economy in the first quarter of 2024. The US dollar flood came from various sources, including Treasury and OMO bills positioning in the financial markets and remittances.
The apex bank has distanced itself from conversion FX sales to boost market value of the naira in the official window. The same thing was done at the informal currency market, causing exchange rate to be on depreciating line for over a month straight.
exchange rate worsened in the parallel market as demand for foreign currency eclipsed the amount available on the supply side. Hence, the naira closed at N1,500 per US dollar from N1490.
