Naira Drops to N1690.37/$ as Dollar Supply Declines
The naira weakened by 2.31 per cent or N38.12 on Monday at the National Autonomous Foreign Exchange Market to N1690.37/$ compared to 1652.25/$ that it had closed the previous week at.
According to FMDQ data on Monday, the daily turnover stood at $173.14m, indicating a 42 per cent decline from $296.63m on Friday.
At the parallel market, the naira closed at 1,735 to the dollar, a strengthening from N1,740 in the previous trading session.
As of Friday, the value of the naira to the dollar had appreciated by 159bps compared to the previous week, printing at N1652.25/$ to close the week.
Meanwhile, activity level surged as average turnover in the NAFEM segment gained 154.6 per cent week-on-week to close at $527.5m.
On the domestic scene, the Central Bank of Nigeria’s foreign reserve advanced 0.5 per cent week-on-week to $40.2bn (as of Nov 13) highest level since January 2022.
There have been multiple projections about the naira in recent times and in its Nigeria Macroeconomic Outlook 2025, Veriv Africa, a data insights company, forecast that Nigeria’s exchange rate will remain largely volatile in 2025, thus extending challenges facing the local currency this year.
The data insights firm warned that Nigeria’s inability to meet its 1.5 million barrels per day crude oil output quota from the Organisation of the Petroleum Exporting Countries has also disrupted its trade balance, further straining the Naira.
For next year, Veriv Africa believes that speculations will continue to play a part in the exchange rate dynamics.
“A high inflationary environment will continue to feed into the dampening of non-oil exports, which could exacerbate the depreciation of the Naira. Poor aggregate supply and limited export potentials have limited external reserves and foreign exchange inflow,” the report said.
In the near term, there are also no indications that the Naira will appreciate, the report said, adding that unless there is a marked increase in foreign exchange inflow and external reserves.
“Without significant improvement in the abovementioned conditions, the lacklustre performance recorded this year will likely be repeated in 2025,” it added.
As part of its recommendation, Veriv Africa pointed out that while the Central Bank of Nigeria has maintained a hawkish stance this year regarding monetary rates, it has not translated to a significant decline in inflation.
“This has largely been a result of the supply-side fundamentals that have influenced inflation in Nigeria. Therefore, the CBN needs to reassess its approach to raising the MPR. Instead, collaborative, supply-side strategies that promote productivity should be prioritised. This approach avoids the trade-off between inflation and economic growth, aiming to control inflation sustainably while fostering growth and reducing unemployment,” the report added.
It also called on the federal and subnational governments to take seriously the need to encourage productivity in the non-oil sector of the economy.
The report recommended, “Beyond the provision of financing, other complementary services must be provided, including a robust quality assurance and testing infrastructure for metals and agricultural commodities, increased investment in affordable energy for manufacturing companies, improvement in transport & storage infrastructure, and well-designed and deployed export promotion activities in key target markets.
“In addition to the activities of the federal government and relevant federal agencies, state governments must enact policies and make targeted investments in sectors where their states have competitive advantages.”
