Dollar demand pushes naira to 1,420/$

dollar to naira rate

The naira on Thursday continued its downward trend against the United States dollar, depreciating to N1,309/$ at the official market and N1,420 at the parallel market.

The new rate which indicates a depreciation of N90 or 6.8 per cent from N1,330 quoted by currency traders on Wednesday followed renewed dollar demand pressure in the foreign exchange market.

According to currency traders at the popular Wuse Zone 4 market, operators bought the greenback note at N1,340 and sold it at N1,420, leaving a profit margin of N80.

Malam Yahu Abubakar in a telephone chat said, “We are selling at N1,420 per dollar today and we bought at N1,340. The only reason why the naira is dropping is because of an increased demand for the greenback. The CBN is trying to address the situation but it has not affected the market.”

Another trader, Abubakar Taura, expressed caution in trading, citing ongoing concerns that the CBN might take some drastic measures to stabilize the dollar.

This apprehension, he explained, was driving high profit margins, providing traders with an opportunity to recover losses.

“Yes, the dollar is rising gradually but we are still afraid and trading cautiously because anything can happen and it falls. You would have noticed that the profit margin is high too. We have to recover some of our losses.”

With the current exchange rate, the naira has lost 26.2 percent in two weeks when compared to N1,125 per dollar quoted on April 12, 2023, on the parallel market, popularly called the black market.

On Monday, the Central Bank of Nigeria approved the allocation of $15.83 million to 1,583 BDC operators. The move was aimed at enhancing liquidity in the unofficial market.

The CBN in a letter to BDCs announced the allocation of $10,000 to operators across the country. The allocation comes at a rate of N1,021 per US dollar, aimed at stabilizing the foreign exchange market and ensuring accessibility of foreign currency to eligible end users.

According to a letter released by the CBN to the Association of Bureau De Change Operators of Nigeria, all eligible BDCs are directed to initiate payments of the Naira deposit to specified CBN Naira Deposit Account Numbers starting from Monday, April 22, 2024. Upon submission of confirmation of payment and necessary documentation, the CBN will disburse foreign exchange at the respective CBN branches.

At the official market, the naira depreciated to N1,309.88 against the dollar by the end of Thursday’s trading. This is a 0.10 percent drop, from the previous rate of N1,308.52 recorded on Wednesday.

A summary of the forex transaction showed that the intra-day high depreciated by N68, closing at N1,435 per dollar from N1,367 per dollar. The intra-day low reduced to N1,100 from N1,098 recorded on Wednesday.

Forex trading volumes between a willing seller and a willing buyer experienced a significant increase of 61 percent, with transactions reaching $318.08m, exceeding the $197.54m previously recorded at the Nigerian Autonomous Foreign Exchange Market on Wednesday.

Over the weekend, the CBN Governor, Yemi Cardoso, stated the Naira was declared the best-performing currency globally as of April 2024.

The naira had the unenviable position of being the worst currency in the country in March when it fell to as low as N1,600/$1 on the official market and N1800/$1 on the parallel market

This achievement follows a series of foreign exchange market reforms and is supported by positive sentiment from leading international investment institutions, he declared.

Cardoso made this remark in a press briefing on the sidelines of the just concluded World Bank/IMF meeting in Washington DC, United States.

However, it remains to be seen what strategies will be used by the apex bank to ensure the stability of the naira for a longer period.