Naira dropped to N1,635 per dollar in the parallel market from N1,625 per dollar over the weekend.
It appears that another round of Naira depreciation has begun due to increased demand pressure and a widening supply gap.
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The data from FMDQ Exchange showed that the indicative exchange rate for the Nigerian Autonomous Foreign Exchange Market (NAFEM) dropped to N1,585.77 per dollar from N1,598.56 per dollar over the weekend. This led to a widening margin between the parallel market and NAFEM rate to N49.23 per dollar from N26.44 per dollar during the weekend. Dealers attribute the increased pressure on the exchange rate in the parallel market to a decrease in dollar supply at the official market end as seen in NAFEM.
Remotimes investigation show that volume of dollars traded (turnover) in the market declined by 58.8 percent yesterday to $71.18 million from $172.8 million traded last week Friday.
In August, the volume dropped by 25% to $3.25 billion from $4.34 billion in July 2024. Parallel market operators noted a rise in the exchange rate due to increased demand without a corresponding supply increase. Remotimes nvestigation found Nigeria’s foreign reserves decreased by $490 million in the same period.
The information from the CBN’s foreign exchange reserves indicates a 1.3 percent month-on-month decrease to $36.3 billion as of August 28th from $36.79 billion at the end of July 2024.
Analysts in the financial sector have attributed the decline to the CBN’s intervention in the FX market in an attempt to stabilize the Naira.
In their monthly market report for August, analysts at Afrinvest West Africa Limited, a Lagos based investment house, mentioned they anticipate the Naira to weaken against the Dollar due to a surge in Business Travel Allowances, PTAs and Business Travel Allowances, BTAs, leading to pressure on the Naira as demand increases.
In their statement, they mentioned, “In the absence of significant inflow to boost FX supply, we expect the naira to be pressured in the month, due to the seasonality effect, as PTAs and BTAs demand peaks.”
