The Nigerian naira experienced a notable depreciation of 5.9 percent against the US dollar, reflecting increased demand amid constrained liquidity in the foreign exchange market. Data released by the FMDQ Securities Exchange Limited revealed that by the end of April, the naira closed at N1,390.96 per dollar, marking a decline from the previous month’s closing rate of N1,309.39.
This depreciation, according to analysts, can be attributed to several factors, including a decline in foreign exchange reserves, mounting inflationary pressures, and sluggish economic growth. These challenges have put significant pressure on the Central Bank of Nigeria (CBN) as it grapples with managing the exchange rate and stabilizing the local currency.
Analysts at Afrinvest Securities Limited characterized the performance of the naira in the currency market as disappointing, particularly considering its promising start for the month. Despite efforts to maintain stability, the naira closed at N1,400.40 per dollar on the final trading day of the week, representing a marginal decrease from the previous day’s closing rate of N1,402.67 at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
While analysts anticipate the naira to sustain its current trading range in the near future, concerns persist regarding its stability amid ongoing economic uncertainties and external pressures. The recent depreciation in the parallel market underscores the persistent demand for foreign currency, driven primarily by import-dependent sectors and capital flight.
The prevailing economic challenges highlight the urgent need for concerted efforts to address structural imbalances in the economy and enhance foreign exchange liquidity. Without meaningful interventions, the vulnerability of the naira to external shocks remains a cause for concern among market observers and policymakers alike.
