Despite a substantial increase in dollar supply by commercial banks and other market operators, the naira continues to exhibit weakness in the official foreign exchange (FX) market, according to recent data from the FMDQ Securities Exchange Limited.
The naira experienced a notable depreciation of 4.40 percent, with the dollar trading at N1,416.57 on Tuesday, marking a decline from N1,354.21 observed on Monday at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
The volume of dollar supply surged by 89.52 percent to $160.77 million on Tuesday from $84.83 million recorded the previous day, highlighting the heightened activity in the FX market.
In spot trading, the intraday high remained steady at N1,445 per dollar on Tuesday, while the intraday low closed at N1,301, weaker than the N1,285/$1 recorded on Monday.
Meanwhile, at the parallel market, also known as the black market, the naira displayed volatility due to a scarcity of dollars and increased demand. While the currency held firm at N1,430 in some areas, it reached N1,445 in other street trading markets.
According to a report by Coronation Research, the exchange rate at the NAFEM window concluded the week 4.37 percent weaker against the US dollar at N1,400.40/US$1. However, in the parallel market, the exchange rate remained unchanged at N1,400.00/US$1 after briefly rising to N1,360.00/US$1.
The report also highlighted that the gap between the official and street markets narrowed by the end of the week. The Central Bank of Nigeria’s published gross foreign exchange reserve saw a marginal increase of 0.41 percent, reaching US$33.29 billion by the week’s close.
The persistent weakness of the naira despite increased dollar supply underscores the challenges facing Nigeria’s currency and the broader FX market. As stakeholders monitor these developments, concerns remain regarding the impact on the country’s economy and foreign exchange stability.