Naira Records biggest Fall to US Dollar at Official Market History, Despite Nigeria’s Rising Foreign Reserves
- It is more trouble for the Nigerian currency, as it falls to its lowest at the official market in 2022 on Tuesday
- An expert is expecting the Naira to weaken further despite a massive rise in Nigeria's foreign reserves to defend
- Because Nigeria is an import-dependent economy, the ongoing decline of the Nigerian currency would exacerbate the economic woes
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Nigerian currency has dropped to its biggest low to the US dollar in the last seven months at the official market, and it could get worst in the coming months.
FMDQ securities data shows that at the official market, Naira on Tuesday closed at N430 which is a N4.25 or 0.99 percent devaluation from N425.75 posted in the previous market session on Monday.
The last time Naira exchange at N430 or above was Thursday, 30th December 2021 at the official market.
Naira's depreciation was expected given the increase in US interest rate and other developing countries.
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Within the past two weeks, it has been trading between the range of N420 and N425 and above the benchmark before getting worst on Tuesday.
Nigeria's foreign reserves on the rise
Meanwhile, Nigeria’s foreign reserve has increased by $628.7 million in the last 30 days, according to data from the Central Bank of Nigeria has revealed.
Legit.ng analysis of the CBN's daily external reserve tracker, showed that Nigeria's foreign reserves increased from $38.62 billion as at 5 June 2022 to $39.1 billion on Monday, July 4, 2022.
Foreign reserves are assets held on reserve used by a country’s central bank to back liabilities and influence monetary policy.
They include foreign banknotes, deposits, bonds, treasury bills and other foreign government securities.
Foreign reserves is critical in helping the Central Bank of Nigeria defend Naira, but this is yet to reflect.
MF calls on Nigeria to abandon official exchange rate
Legit.ng had earlier reported that the International Monetary Fund is asking Nigeria to ditch the official exchange rate.
According to the IMF, the use of the official exchange rate is hurting the economy of Nigeria and asked the CBN to review its policies.
IMF also called for the Nigerian government to do away with fuel subsidy and use the funds to build infrastructure.