Naira records temporary gain despite persisting exchange rate volatility

The Naira on Friday extended its gains against the US dollar at the official foreign exchange market despite persistent volatility in the exchange rate of the local currency.

Data from FMDQ showed that the value of the Naira to the dollar appreciated by 1,665 bps to print at ₦869.39/$ this on Friday at the Investors and Exporters FX Window.

This was against N895.23 to the US dollar, which it closed on Thursday.

On Thursday, the country’s currency strengthened against the US dollar for the first time this New Year.

Meanwhile, the Naira dropped by 1.99 percent to N1,255 per US Dollar on Friday compared to N1,230 per US dollar.

The Nigerian Federal Government received a $2.25 billion foreign exchange support loan from the African Import-Export Bank barely two weeks ago.

Professor of Capital Market, Nasarawa State University Keffi, Professor Uche Uwaleke while commenting on persistent foreign exchange (Forex) challenges said that for many businesses that depend on imported raw materials, difficulty in accessing forex is most likely to linger in view of the arrears of unmet forex demand which the CBN still grapples with.

According to him, the CBN governor is reported to have said that exchange rate pressures would reduce significantly in 2024 against the backdrop of expected credit lines from Afreximbank and a consortium of banks.

“But these represent attempts to address the supply side of the market. Until the demand side is taken care of, especially with the readmission of the 43 items to the forex market, the pressure in the forex market is not likely to abate substantially. To compound issues, foreign reserves is said to be at the lowest in six years with much of it encumbered by overdue short-term foreign obligations.

“Little wonder the Economic Intelligence Unit (EIU) recently predicted, in its Africa Outlook 2024 report that the naira would depreciate by 10 percent or more in 2024. According to a recent report by Bloomberg, the naira fell 55 percent in 2023 to N1,043 per dollar at the official market as of Thursday December 28, 2023,” the university don stated in a position paper seen by Nigerian Tribune.

Like the EIU, Bloomberg is also predicting that the naira will decline further in 2024. Against this backdrop, capacity utilisation will likely be negatively impacted which in turn will affect bottom lines and ability of listed companies to pay dividends. The CBN has stopped banks from paying dividends from forex gains, he disclosed.