Naira declines after days of gains at official, parallel markets

The naira, which demonstrated robust performance across both official and parallel markets last week, witnessed a marginal slump against major foreign currencies on Monday, December 9, 2024.

Analysts attribute this fluctuation to persistent challenges in Nigeria’s foreign exchange market, including speculative trading and limited dollar supply.

The Nigerian currency showed notable gains last week. In the official market, it began at ₦1,663/$1 on Monday, December 2, and appreciated by ₦126/$1 to close at ₦1,537/$1 on Friday.

A similar trend was observed in the parallel market, where the naira improved by ₦200/$1, trading at ₦1,530/$1 by the end of the week compared to ₦1,730/$1 on Monday, December 2.

However, the naira began this week on a slightly weaker note. Central Bank of Nigeria (CBN) data showed the currency depreciated by ₦3.50/$1 to trade at ₦1,538.50/$1 in the official market on Monday, down from ₦1,535/$1 recorded on Friday.

The parallel market also reflected this decline, with the naira losing ₦30/$1 to settle at ₦1,630/$1, compared to ₦1,600/$1 on Sunday.

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Similarly, the naira recorded significant losses against the British Pound, depreciating by ₦200/£1 to trade at ₦2,200/£1, from the previous day’s rate of ₦2,000/£1.

Against the Canadian Dollar, the naira gained slightly, trading at ₦1,280/CA$1, an improvement of ₦20/CA$1 from ₦1,300/CA$1.

The naira appreciated by ₦60/€1 against the Euro, trading at ₦1,750/€1, up from ₦1,810/€1 the previous day.

Financial experts attribute the naira’s recent decline to speculative activities and supply constraints in the foreign exchange market. Dr. Olumide Adetayo, an economist at the University of Lagos, stated:

“The market remains highly volatile, reflecting underlying structural issues such as dollar scarcity, inconsistent policy measures, and speculative trading. While last week’s gains were promising, sustaining such momentum requires broader reforms.”

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Fisayo Ogundele, a forex trader in Lagos, highlighted that: “The parallel market is particularly sensitive to market rumors and speculative demand. Monday’s decline could be a reaction to anticipated policy shifts or reduced dollar inflow.”

To stabilize the naira, experts emphasize the need for policy consistency, enhanced transparency in foreign exchange allocation, and fostering investor confidence.

The Central Bank is urged to increase interventions and explore innovative ways to boost dollar supply, such as export promotion and diaspora remittances.

With the year-end approaching, analysts predict continued fluctuations unless decisive actions are taken to address Nigeria’s lingering forex challenges.