On October 31, 2023, the Nigerian Autonomous Foreign Exchange Market (NAFEM) witnessed a historic low as the Naira tumbled to an unprecedented rate of N993.82 per US dollar. This shocking depreciation of the Naira, marking a 25.81 percent decline from the previous Friday’s rate of N789.94, sent shockwaves through the official foreign exchange market.
The FMDQ data revealed that the foreign exchange market experienced a staggering 66.01 percent reduction in daily turnover, plummeting from $259.84 million on Friday to a mere $88.31 million on Monday. This sharp decline in dollar supply added to the Naira’s woes.
In response to this dire situation, Nigeria is now taking aggressive steps to implement a series of policies, including a crackdown on illegal currency trading, with the aim of bridging the more-than-45 percent gap between the official exchange rate and the unofficial rate. Authorities are setting their sights on achieving a “fair price” of seven hundred and fifty Naira to the dollar by the year’s end.
In a surprising turn of events, the Naira experienced a 2.5 percent gain on Monday, with the dollar falling to N1,170 in the parallel market, often referred to as the black market. This reversal saw the dollar quoted at N1,170, a notable improvement from the N1,200 rate observed just the previous Friday.
The Naira’s rally on the parallel market can be attributed to government policies that have left speculators uncertain. The Federal Government is also planning to digitize FX transactions, aiming to discourage speculative demands and the hoarding of cash in foreign exchange.
As the nation grapples with these economic challenges, the future of the Naira’s exchange rate remains uncertain, with all eyes on the government’s efforts to stabilize the currency and the foreign exchange market.
