Naira weakens further, hits N1,544.50/$1 on official market, N1,647/$1 in parallel trade

The naira faced continued depreciation across Nigeria’s foreign exchange markets this week, closing at N1,544.50/$1 on the official market and reaching as high as N1,647/$1 in the parallel market.

The widening disparity between the official and parallel rates underscores ongoing challenges with dollar accessibility and exchange rate stability.

On Friday, January 10, 2025, the naira closed at N1,544.50/$1 on the Central Bank of Nigeria (CBN) currency tracker, a marginal decline from Thursday’s rate of N1,542.00/$1.

Meanwhile, in the parallel market, the naira traded between N1,645.00/$1 and N1,647.00/$1, reflecting heightened volatility.

The week began with a relatively stronger naira, opening at N1,530.00/$1 on Monday, January 6, 2025, on the official market.

However, the currency faced persistent downward pressure, hitting its weakest point at N1,548.00/$1 midweek before slightly recovering to close at N1,544.50/$1 by Friday.

CBN data reveals that the naira recorded an intraday average of N1,543/$1 between Thursday and Friday, compared to the N1,533.75/$1 average at the beginning of the week.

In the Nigerian Foreign Exchange Market (NFEM), the naira closed at N1,542.0256/$1 on Friday, dropping from its opening rate of N1,533.6065/$1 earlier in the week.

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In the parallel market, the naira’s performance was notably worse, with trading prices fluctuating between N1,645.00/$1 and N1,647.00/$1.

The week’s volatility was attributed to surging demand from importers, speculative trading, and continued dollar scarcity, according to market sources.

Observers highlight that the naira’s depreciation reflects mounting pressures on Nigeria’s foreign exchange reserves and the widening gap between dollar supply and demand. Speculative activities, coupled with uncertainties surrounding Nigeria’s foreign exchange policy, have further destabilized the market.

The challenges persist despite the CBN’s efforts to stabilize the naira. In June 2023, the apex bank lifted the rate cap on the naira in the Investors’ and Exporters’ (I&E) Window, allowing the currency to float freely against the dollar and other global currencies.

This policy shift followed President Bola Tinubu’s promise to unify Nigeria’s multiple exchange rates.

However, interventions such as dollar auctions and restrictions on foreign currency spending have yet to yield significant improvements, leaving the naira vulnerable to market forces and external pressures.

The parallel market continues to act as a barometer for underlying economic uncertainties and dollar scarcity.

Analysts suggest that resolving Nigeria’s foreign exchange challenges will require sustained policy clarity, increased dollar inflows, and strategic reforms to restore confidence in the naira.

Without significant improvements in dollar supply and effective management of speculative activities, the naira is likely to remain under pressure in both the official and parallel markets.