Naira collapses further, hits N705/$ at parallel market

Naira continued its downturn trend on Tuesday, exchanging N705 to one US dollar at the parallel market.

The last time the Naira reached the 700/$ range was on July 27, 2022. However, the latest decline in the Naira comes following a 34.3% decline in FX turnover, from $82.38 million on Friday, August 26, 2022, to $54.13 million on Monday.

The Naira’s depreciation follows reports that the Central Bank of Nigeria has released $265 million to save the Aviation sector, with a portion of it going to pay blocked funds owing to foreign airlines.

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The crash of the Naira comes despite the central bank’s interest rate hike to 14% in July 2022 and the savings deposit interest rate increase from 1.4% to 4.2% in order to curb rising inflationary pressure as well as encourage FX inflow into the economy.

The reserve level had fallen dramatically year to date as a result of the CBN’s ongoing intervention in the official FX market to limit exchange rate volatility. Nigeria’s external reserves declined by 3.3% on Tuesday, 30th August 2022 to stand at 39.181 billion from $40.520 Billion recorded on 31st December 2021. This is indicative of a $1.339 billion Year to date.

According to the apex bank, foreign exchange inflows through the RT200 FX Programme surged significantly in Q1 and Q2 of 2022, reaching around US$600 million as of June 2022. Nonetheless, the rise in foreign exchange inflows via the RT200 FX does not appear to be adequate to alleviate Naira concerns.