In the past week, the Nigerian Naira experienced a significant decline in value against major foreign currencies, with notable losses observed in both the parallel and official foreign exchange markets. This depreciation occurred despite the efforts of the Central Bank of Nigeria (CBN) to stabilize the currency through its Retail Dutch Auction System (RDAS).
The Naira lost N30 in the parallel market and N28.48 in the official foreign exchange market. As a result, the Naira’s exchange rate fell to N1645 per dollar on Friday. This is a noticeable drop compared to the N1615 per dollar rate recorded the previous Friday, August 23, 2024. This decline indicates a weakening of the Naira in recent days.
Similarly, data from the FMDQ, which tracks official foreign exchange market trading, revealed a decline in the Naira’s value. This Friday, the rate dropped to N1598.56 per dollar, down from N1570.14 per dollar recorded the previous week.
The Central Bank of Nigeria has been actively involved in the foreign exchange market, implementing various measures to stabilize the Naira. However, these efforts have not yet been successful in halting the currency’s decline. The Retail Dutch Auction System, which was reintroduced by the CBN in recent weeks, was intended to address the increasing demand for dollars and improve the stability of the Naira. However, the system’s reintroduction does not appear to have had the desired effect, as evidenced by the continued depreciation of the Naira.
One of the key indicators of the currency’s performance is the foreign exchange transaction turnover. On Friday, the turnover increased to $172.80 million from $155.52 million recorded on Thursday. This increase in transaction turnover suggests that there is a higher level of trading activity in the foreign exchange market. Despite this increased activity, the Naira has not strengthened against the dollar over the past seven days.
The weakening of the Naira in both the parallel and official markets indicates a broader issue with the currency’s stability. The Naira’s depreciation is a concern for businesses and individuals who rely on foreign currencies for their transactions. As the Naira continues to lose value, the cost of importing goods and services increases, which can lead to higher prices for consumers.
The CBN’s interventions in the foreign exchange market, including the Retail Dutch Auction System, were aimed at addressing the issues of currency depreciation and stabilizing the Naira. However, the recent developments suggest that these measures have not yet been fully effective. The CBN may need to explore additional strategies or adjustments to its current approach to better manage the currency’s value.
