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The volatility of the Naira against the US dollar continues to send shockwaves of uncertainty through Nigeria’s economy, affecting investors’ confidence. Last week, there was a brief respite as the country’s currency strengthened against the dollar, trading at N970/$1 in the parallel market compared to N1300/$1 the previous week.
The naira started this week on a weak note, with exchange rates ranging from N1000 to N1020/$1 on Monday. This represents a slight depreciation from the N970/$1 rate over the weekend. Similarly, at the official FMDQ market, the Naira depreciated slightly by 4.24 percent to N809.02/$1, down from N780.03/$1 on Friday. Meanwhile, Foreign Exchange Reserves in Nigeria increased to $33,340 million in October from $33,240 million in September 2023.
The strength of the Naira is determined purely by crude oil sales. Unless we witness substantial crude oil exports, the currency will remain unstable. For the Naira to regain sustainable strength, sustainable efforts must be implemented to address supply rigidities. Otherwise, the unstable global oil market will continue to dictate the happenings in Nigeria’s forex market. And at best, swings in the exchange rate would remain large.
Don at the Lead City University in Ibadan, Prof Godwin Oyedokun, stated that sustaining the Naira surge at the forex is a complex challenge that requires a comprehensive solution. He identified seven action points the government must carry out to address Naira’s instability in the forex market, which include implementing sound monetary policies, enhancing foreign exchange reserves, promoting export diversification, controlling inflation, strengthening local industries, and enhancing transparency and accountability which eventually led to regaining investor confidence.
Read Also:
https://trendsnafrica.com/nigeria-to-decide-exchange-rate-of-naira-based-on-market-forces/
https://trendsnafrica.com/free-fall-of-naira-in-official-and-black-markets/
The stability of the Naira is dependent on available forex to intervene in the market. The recent decline could be attributed to the assertions by the airlines that only 10 per cent of their backlog has been cleared. This shows that the CBN needs to do more to create confidence in the system, stated the CEO of SD & D Capital Management, Idakolo Gbolade. Crude oil revenue is one of the country’s major sources of revenue, and fluctuations will affect our ability to increase revenue to show up in foreign reserves. The government should intensify its intervention by supplying more forex to clear the backlogs and meet new requests.
