The naira continued its downward trend, closing at N1,625.13 to the U.S. dollar in the official Investor and Exporter (I&E) window, marking a 4.06 per cent drop from the previous day’s close of N1,561.76.
This sharp decline in the naira’s value comes amid falling crude oil futures, which dipped to around $76 per barrel, reflecting broader economic pressures on Nigeria’s foreign exchange dynamics.
Market turnover in the I&E window also plummeted by 49 per cent, with total dollar trades amounting to $170.60 million, a significant drop from the $253.68 million recorded the day prior.
This contraction highlights reduced dollar liquidity in the market, a situation that experts believe could worsen the already strained currency situation.
Throughout the trading session, the naira experienced notable fluctuations, reaching an intra-day high of N1,652.00 and a low of N1,560.00, before settling at N1,625.13.
The parallel market mirrored this volatility, with the naira opening at N1,619.22 per dollar and closing the day at N1,618.85 after minor fluctuations.
“The naira’s sharp depreciation is a reflection of Nigeria’s ongoing foreign exchange supply issues, coupled with global oil market instability,” said Dr. Musa Ibrahim, a currency analyst at Zenith Capital.
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He emphasized that the decrease in oil prices is particularly concerning for Nigeria, a country that relies heavily on crude exports to stabilize its foreign reserves.
“With crude oil dipping to $76 per barrel, the pressure on Nigeria’s forex reserves intensifies, especially when considering that crude accounts for nearly 90 per cent of the country’s foreign exchange earnings. The combination of a weakened naira and declining oil revenue will further squeeze liquidity in the market,” Ibrahim added.
Beyond oil, the rise in fuel prices, now reaching N1,030 per liter, is set to compound inflation concerns.
Fuel costs are a significant driver of inflation in Nigeria, as transportation and production are heavily dependent on affordable energy.
“Manufacturers will likely pass these increased costs onto consumers, leading to higher prices across a wide range of goods, which will hurt household spending power,” said economist Dr. Bisi Adesina of Lagos Business School.
The naira’s devaluation in 2024 has been staggering, depreciating by over 70 per cent since January when it traded at N907.11/USD. By October, the currency had breached the N1,500/USD threshold.
In February, the naira hit a record low of N1,616.53 before briefly stabilizing in March at N1,303 per dollar, only to resume its decline by April. By the end of September, the naira was trading at N1,668.97.
This year’s prolonged currency volatility can be traced to multiple factors, including declining foreign exchange reserves, reduced oil revenues, and a loss of investor confidence.
According to market analyst Bola Akintola, “The continued weakness of the naira is eroding investor sentiment. Major market players will require a more favorable macroeconomic environment to sustain their interest in Nigeria’s currency markets.”
Rising fuel prices, combined with a weaker naira, will place further pressure on inflation, which has already surged in recent months.
Analysts warn that unless there are improvements in Nigeria’s forex liquidity and energy sector reforms, the currency could face further devaluation.
“Long-term stability will depend on improved oil revenue, diversification of the economy, and structural reforms in the energy and forex sectors. Without these, the naira will continue to be vulnerable to both domestic and international pressures,” concluded Adesina.