Naira Continues Free Fall in All Markets as Africa’s Largest Bank Predicts New FX Rate in 2024

Naira Continues Free Fall in All Markets as Africa’s Largest Bank Predicts New FX Rate in 2024

  • The naira again dropped in value in all markets on Monday, May 13, 2024, to continue a seven-week descent
  • The local currency closed in the official market at N1,478.11 per as against the N1,466.31 it traded the day before
  • The naira recorded the biggest loss in the parallel market, exchanging for N1,520 as against the N1,490 it traded on Friday, May 10, 2024’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.

The Nigerian currency continued its freefall in all markets. Traders in the official market quoted the spot exchange rate at a high of N1,515 per dollar and a low of N1,301 per dollar.

The naira finally closed at N1,478.11 per dollar in the official market on Monday, May 13, 2024, as against the N1,466.31 it exchanged for on Friday, May 10, 2024.

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The Naira falls again in all markets.
Despite the increased turnover, the naira crashed in all markets Credit: Bloomberg/Contributor
Source: Getty Images

The naira falls despite a rise in turnover

In the parallel market, traders sold the dollar at N1,520 per dollar as against the N1,490 it sold on Sunday, May 12, 2024.

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Data from the FMDQ Exchange shows that the Forex market recorded a turnover of $217.64 million, up from $112 million recorded on Friday, May 10, 2024.

The naira has been on a seven-week fall after emerging as the world’s best-performing currency in April.

A few weeks later, the local currency reversed its gains, becoming the worst-performing currency despite a series of reforms by the Central Bank of Nigeria to ensure stability.

CBN stalls FX sales to BDCs

To intervene in the retail segment of the forex market, the CBN resumed dollar sales to BDCs in February. Since then, the apex bank has held three editions of the dollar.

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Analysts blamed the naira's freefall on the CBN's failure to sell FX to the Bureau de Change (BDC) operators.

In the last round, the apex bank sold $10,000 to BDCs, directing them to resell at 1.5% to customers.

However, Vanguard reports that the operators complained that dollar disbursement from the CBN is too slow, taking about four weeks between payments and when the bank disburses FX to them.

Financial expert and banker Maurice Ibeh predicted that the naira will hit N2,000 per dollar before the end of the year, except the CBN continues its interventions by selling FX to BDCs at a low rate.

Analyst calls for continued FX interventions

He said the interventions helped shore up the naira's value in April.

“I do not want to be pessimistic, but what happened in April seemed to be a smokescreen. Immediately after the CBN cleared the FX backlog, the naira’s value went up, sustained by CBN’s FX sales to BDCs.

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“We are wondering why the interventions stopped in the last three weeks. Because the naira cannot float, interventions are necessary to keep it close to par with major currencies,” he said.

The naira’s fall comes amid a rise in external reserves, which hit a three-week high of $32 billion but were $2 billion short of pre-March figures.

The reserves added about $262 million in the last three weeks after reports emerged that the CBN used it to defend the naira against volatility.

Standard Bank predicts new exchange rate earlier reported that a report by Standard Bank predicts that the Nigerian foreign exchange market will see a significant influx of capital in the second half of the year.

The report predicts $5.1 billion in funding inflows into the Nigerian economy in the second quarter of this year.

The banking group forecasts a foreign inflow of $5.5 billion into Nigeria from Eurobond sales and the NNPC crude payment facility from Afreximbank.

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