Experts warn of further depreciation as Naira continues freefall

The Nigerian naira continued its downward trajectory mid-week, depreciating further against the US dollar in both the parallel and official markets.

The persistent decline in the local currency has raised concerns among economic analysts, businesses, and policymakers about the future of Nigeria’s foreign exchange market.

On Wednesday, February 12, 2025, the naira weakened to ₦1,570/$1, down from ₦1,565/$1 on Tuesday in the parallel market. The trend reflects a sustained decline from Monday’s rate of ₦1,560/$1.

A Bureau De Change (BDC) operator in Wuse Zone 4, Abuja, confirmed the price movement, attributing the depreciation to rising demand for the US dollar and a limited supply of forex.

The naira’s weakness extended to the official market, where it closed at ₦1,502.00/$1 on Monday before further depreciating to ₦1,513.10/$1 by Tuesday.

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Trading data also showed the currency exchanged at ₦1,498.78/$1 (buying) and ₦1,499.78/$1 (selling), signaling continued pressure on the exchange rate.

The depreciation was not limited to the US dollar, as the naira also weakened against other major currencies, including the British pound and the euro in the parallel market.

Financial analysts say the naira’s persistent depreciation highlights deep-rooted forex supply challenges and speculative activities in the market.

Dr. Hassan Yusuf, an economist at the University of Lagos, explained: “The continuous decline of the naira is a direct result of weak forex inflows, heavy reliance on imports, and speculative trading. Despite CBN’s policy interventions, the demand for dollars far outweighs the supply, creating a supply-demand imbalance that fuels depreciation.”

Similarly, FX market analyst, Okey Chukwu, noted that low foreign direct investment (FDI), dwindling external reserves, and capital flight have worsened forex scarcity.

“Until Nigeria sees a significant inflow of forex—whether through foreign investments, increased non-oil exports, or improved remittances—the naira will remain under pressure. The current trajectory suggests further depreciation unless decisive action is taken,” he warned.

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CBN Governor Olayemi Cardoso recently reiterated the bank’s commitment to enforcing ethical behavior in forex transactions.

He warned that there would be severe consequences for violations of the newly introduced Nigeria Foreign Exchange (FX) Code, aimed at improving transparency and stability.

With the naira having lost 70% of its value since Nigeria loosened forex controls in 2023, businesses and individuals reliant on forex transactions continue to navigate an uncertain financial landscape.

Economic experts are calling on the government to strengthen non-oil exports, improve forex inflows, and restore investor confidence to curb the naira’s downward spiral.

Until these structural issues are addressed, exchange rate volatility may persist, keeping businesses and consumers on edge.