The Nigerian Naira ended the week slightly weaker against the U.S. dollar, losing 19 kobo on Friday, August 1, at the official foreign exchange market. According to the Central Bank of Nigeria (CBN), the Naira closed at N1,533.74/$1, compared to N1,533.55/$1 on Thursday.
This marginal depreciation comes despite modest gains seen earlier in the week, highlighting ongoing volatility in Nigeria’s foreign exchange market, which has been under pressure following the CBN’s decision to float the Naira at the Investors’ & Exporters’ (I&E) window.
The local currency began the week with cautious optimism, opening at N1,534.20/$1 on Monday. However, a dip was recorded midweek, as the Naira traded at N1,534.52/$1 on Wednesday, before briefly improving on Thursday. Despite the brief uptick, Friday’s depreciation indicates the market remains unsettled, with both demand and supply dynamics struggling to find balance.
Since the CBN floated the Naira in mid-2023, the FX market has witnessed increased volatility driven by speculative trading, limited forex inflows, and rising demand for dollars, especially from importers, students, and businesses repatriating profits. Analysts have repeatedly warned that without robust foreign capital inflows and improvements in Nigeria’s balance of payments, the Naira will continue to face downward pressure.
Economic analyst and forex trader, Segun Oladipo, told PUNCH that Friday’s dip is a reflection of “underlying structural weaknesses in Nigeria’s forex ecosystem.”
“There’s still a mismatch between forex demand and supply. The floating of the Naira was a bold move, but it must be supported with real sector investments and remittance-friendly policies,” Oladipo explained.
The persistent weakening of the Naira has implications for inflation, external debt servicing, and business costs in the country. With Nigeria heavily reliant on imports for fuel, machinery, and food, any significant slide in the Naira often translates into higher prices for everyday consumers.
The most recent inflation figures from the National Bureau of Statistics (NBS) indicate that headline inflation stands at 34.2%, largely driven by food and energy costs. The depreciation of the Naira further complicates efforts to stabilize prices, even as the Tinubu administration pushes fiscal reforms and renewed investment in infrastructure.
The Central Bank has pledged continued intervention to stabilize the FX market through monetary tightening and improved liquidity. In July, the CBN raised the Monetary Policy Rate (MPR) to 26.75%, signaling its intent to curb inflation and attract foreign portfolio investors.
However, the sustainability of these interventions remains in question unless Nigeria significantly boosts its non-oil exports, eases bureaucratic hurdles for diaspora remittances, and attracts long-term foreign direct investment (FDI).
Key Takeaways:
Naira depreciated by 19 kobo on Friday, closing at N1,533.74/$1.
Week opened at N1,534.20/$1, showing minimal gains before midweek fluctuations.
Analysts cite weak forex inflows and persistent demand pressures.
Inflationary concerns remain elevated amid volatile FX trends.
CBN continues efforts to stabilize the market through monetary policy tools.
As Nigeria navigates the evolving forex landscape, market watchers will be keenly observing next week’s trading activities to see whether the Naira can regain ground or continue its slow slide against the greenback.