The Naira has recently experienced significant depreciation in the parallel market, reflecting fresh demand pressures. As of yesterday, parallel market dealers traded the currency at ₦1,705/$1.00, a drop from ₦1,655/$1.00 just a week ago. This marks a consistent downward trend that is notable, as it diverges from the relatively stable range of ₦1,645 to ₦1,655/$1.00 observed over the previous two months.
Market dealers have reported supply shortfalls in recent weeks, which may have contributed to this depreciation. The situation has also affected the official market, where the indicative exchange rate for the Nigerian Autonomous Foreign Exchange Market (NAFEM) slipped to ₦1,541.94/$1.00, down from ₦1,540.78/$1.00 over the weekend, reflecting a depreciation of 96 kobo.
The current exchange rate trends indicate a reversal from the positive trajectory seen at the end of last year. In Q4 2023, the Naira closed at ₦1,215/$1.00 after previously reaching a peak of ₦1,800/$1.00 in the third quarter of 2023. The currency started 2024 on a strong note, appreciating to ₦1,220/$1.00.
However, by the second quarter of this year, the Naira began to depreciate steadily, ending at a quarterly average of ₦1,620/$1.00. Following a period of stability around ₦1,630/$1.00 in much of the third quarter, the latest depreciation raises concerns about a potential repeat of the severe depreciation experienced in Q4 2023.
As the situation unfolds, stakeholders are closely monitoring the market dynamics to assess further implications for the Nigerian economy.