The Nigerian Naira continues to face depreciation pressures, with the parallel market rate nearing N1,740 to the dollar at the end of last week, an indication that the currency may lose its earlier gains in 2024. Although minor appreciation was recorded in the Nigerian Autonomous Foreign Exchange Market (NAFEM), with a slight rise to N1,600 per dollar, the broader outlook suggests increasing instability due to ongoing demand pressures and limited foreign exchange supply.
As dealers and analysts express concerns over a projected rate of N1,750/$1 by month-end and potentially N1,800/$1 by the close of 2024, the Central Bank of Nigeria (CBN) may need to intervene to curb this trend. The CBN, which had not held retail Dutch FX auctions since August 8, is now planning to implement a new Automated FX Trading model aimed at reducing market distortions, enhancing transparency, and potentially boosting liquidity.
At the recent World Bank Group annual meetings, Nigerian officials highlighted supply-side challenges in the foreign exchange market, particularly around low oil production levels. Finance Minister Wale Edun emphasized that increasing Nigeria’s oil output could alleviate some of the foreign exchange shortages. Meanwhile, in the parallel market, traders attribute the dollar scarcity to high demand from importers and limited access to the official forex market, causing many to turn to black market options.
The CBN’s expected intervention, potentially involving enhanced FX trading systems, may provide temporary relief, but without addressing fundamental supply issues, the naira could face continued pressure, marking it as one of the worst-performing currencies globally in 2024.
