Business
Naira weakens further, depreciates against across all markets
The Nigerian currency, the naira, experienced further depreciation across various markets on Tuesday, January 21, 2025, following the inauguration of Donald Trump as the 47th President of the United States.
Analysts attributed the naira’s decline to heightened global uncertainty, shifts in market sentiment, and domestic economic vulnerabilities.
Data from the FMDQ Securities Exchange showed that the naira weakened marginally at the official window, closing at ₦1,552.78/$1, a decline of ₦2.37 from the previous day’s rate of ₦1,550.05/$1.
At the black market, the naira recorded a sharper drop, closing at ₦1,670/$1, a ₦10 depreciation from Monday’s rate of ₦1,660/$1.
Against the British Pound, the naira slid by ₦10, trading at ₦2,080/£1, compared to ₦2,070/£1 the previous day.
The naira also lost ₦5 against the Euro, trading at ₦1,700/€1, down from ₦1,695/€1.
However, it remained steady against the Canadian Dollar, holding at ₦1,280/CA$1.
Dr. Chijioke Umeh, an economist and currency market analyst, linked the naira’s depreciation to a combination of external and domestic factors:
“Donald Trump’s return to the U.S. presidency has introduced significant uncertainty into global financial markets. Investors are cautious about his economic policies, particularly his stance on trade and monetary policy, which could affect dollar flows into emerging markets like Nigeria.”
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Locally, Nigeria’s persistent foreign exchange supply challenges and dependence on oil exports have made the naira particularly vulnerable.
“The country’s foreign reserves are under strain, limiting the Central Bank of Nigeria’s ability to intervene effectively in the forex market,” said Bola Adebayo, a financial analyst with Sterling Capital.
The sharp depreciation in the parallel market reflects speculative activities and high demand for dollars by importers and travelers, noted Tolu Adebisi, an FX trader. “The black market often reacts more swiftly to global events, and Trump’s inauguration has heightened uncertainties, pushing demand higher.”
The continued weakening of the naira is expected to exacerbate inflationary pressures, particularly on imported goods and services.
Dr. Umeh warned, “If the Central Bank doesn’t introduce measures to stabilize the naira, the ripple effects could be significant, from increased cost of living to reduced investor confidence.”
As global markets adapt to the Trump administration’s policies, analysts expect the naira to remain under pressure. However, Bola Adebayo suggested that coordinated fiscal and monetary interventions could help ease the strain on the currency:
“Strengthening domestic production, addressing forex liquidity, and rebuilding foreign reserves are critical steps for Nigeria to weather this period of volatility.”
With the naira’s decline now a pressing concern, stakeholders are calling for urgent measures to stabilize the currency and shield the Nigerian economy from further external shocks.
As global dynamics evolve, the resilience of the naira will depend on both proactive domestic policies and a stable international economic environment.