Nigerian Naira Faces 6.43% Depreciation in July 2024 Amid Market Pressures
Nigeria’s exchange rate closed July 2024 at N1608.73 per US dollar, reflecting a 6.43% depreciation in the official market for the month. This decline marks the naira’s weakest performance in four months, with exchange rates fluctuating between a low of N1,500.32 and a high of N1,621.12, thereby surpassing the N1,600 threshold.
The depreciation persisted despite concerted efforts by the Central Bank of Nigeria (CBN) to mitigate market illiquidity through strategic dollar sales. In a bid to stabilize the naira, the CBN conducted at least three foreign exchange (FX) sales to authorized dealers and one significant sale to Bureau de Change (BDC) operators in July.
These interventions by the CBN were aimed at alleviating the intense pressure on the naira and appeared to have positively impacted FX turnover on the Nigerian Autonomous Foreign Exchange Market (NAFEM) window. According to data from Nairalytics, the research division of Nairametrics, FX turnover in the official market surged by 30%, reaching $4.34 billion in July compared to $3.33 billion in June.
Moreover, the Central Bank of Nigeria sold a minimum of $377.17 million to authorized FX dealers throughout the month. This influx of foreign currency was intended to bolster the market and support the naira amidst escalating demand and fluctuating supply dynamics.
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Despite these efforts, the naira’s depreciation underscores the ongoing challenges facing Nigeria’s economy. Persistent pressures on the local currency are reflective of broader economic issues, including fluctuating oil prices, foreign exchange reserves, and the overall stability of the financial market.
The CBN’s continued intervention highlights the critical role of effective monetary policy in maintaining currency stability and supporting economic growth.
As Nigeria navigates these turbulent economic waters, the effectiveness of these measures will be crucial in determining the trajectory of the naira and the broader economic landscape.
Investors and stakeholders will closely monitor the situation, looking for signs of stabilization or further volatility. The interplay between market forces, policy responses, and external economic conditions will undoubtedly shape Nigeria’s financial future in the months to come.
The Central Bank of Nigeria (CBN) conducted multiple foreign exchange sales in July to stabilize the naira. In the first week, the CBN sold $122.67 million to 46 authorized dealers over two days, with bid ranges between N1,480/$1 and N1,500/$1.
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The second sale occurred the following week, with $106.5 million sold to 29 dealer banks at rates from N1,498/$1 to N1,530/$1. Additionally, $9.5 million was purchased from four dealers. In the third sale, the CBN sold $148 million to 29 dealers at rates between N1,470/$1 and N1,510/$1.
Furthermore, on July 18, 2024, the CBN approved $20,000 sales to each Bureau de Change (BDC) at N1,450/$1 to meet demand for invisible transactions. These efforts aimed to mitigate the naira’s severe pressure from corporate demand and seasonal factors.