The Naira yesterday experienced mixed movements across different segments of the foreign exchange market, depreciating in the parallel market while making a slight gain in the Nigerian Foreign Exchange Market (NFEM).
In the parallel market, the Naira fell to N1,570 per dollar, marking a N10 loss from its N1,560 per dollar rate on Tuesday. This depreciation reflects continued pressure on the local currency as demand for dollars outweighs supply in the unofficial market.
However, in the official NFEM window, the Naira appreciated to N1,513 per dollar, compared to N1,513.1 per dollar recorded on Tuesday, representing a minor gain of 10 kobo.
According to data released by the Central Bank of Nigeria (CBN), this slight appreciation in the official market suggests some level of liquidity or intervention by the regulatory body to stabilize the currency amid ongoing volatility.
Despite this, the gap between the parallel market rate and the NFEM rate widened significantly. The difference between both markets increased to N57 per dollar, up from N46.9 per dollar recorded on Tuesday. This growing disparity highlights the persistent divergence between official exchange rates and street market transactions, raising concerns about speculative trading and the effectiveness of CBN’s exchange rate policies.
Factors Driving the Naira’s Movement
Financial analysts attribute the continued pressure on the local currency to multiple factors, including:
- Increased dollar demand from importers, businesses, and travelers.
- Speculative trading by currency hoarders looking to profit from exchange rate fluctuations.
- CBN’s forex policies, which impact the availability of dollars in the official window.
- Economic fundamentals, including inflation and investor confidence in Nigeria’s economy.
As the country grapples with foreign exchange challenges, experts suggest that further policy interventions, improved dollar liquidity, and enhanced economic stability measures will be necessary to strengthen the Naira and close the gap between the official and parallel markets.
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