Nigeria’s naira has recorded its worst performance in six months as it exchanged for N1,625.88 to the dollar on the official NAFEM market on Wednesday, August 4, 2024.
This marks the lowest exchange rate since March 8, 2024, when it was recorded at N1627.4/$1.
According to the FMDQ data for the NAFEM window, the naira’s depreciation on August 4 represents a 0.89% decline from the previous day’s rate of N1,611.34/$1.
Intra-day activity showed that the naira traded at a high of N1,640/$1 and a low of N1,400/$1, indicating significant volatility in the foreign exchange market before settling on the equilibrium of N1,625.88.
The $205.76 million FX turnover for the day was a marginal drop of 1.84% compared to the previous day’s $209.61 million – the highest since August 12, 2024.
The drop in exchange rates indicates an uncertain trend as the Nigerian government announced a 45% increase in the pump price of petrol on September 3, 2024.
This is believed to spark a high inflation rate which would herald a wave of renewed hardship for the citizens, households and businesses.
Nigeria’s headline inflation rate fell in July for the first time in well over two years – dipping to 33.40% in annual terms from 34.19% recorded in June.
Food inflation rate in July 2024 was 39.53% points higher compared to the 12.55% rate recorded in July 2023
This crash occurred amid a reported hike in petrol prices across the country, which may add to the plights of businesses and ordinary Nigerians, further worsening inflation.
The consistent decline in FX turnover from July to August, alongside significant daily fluctuations, highlights the growing strain on the official market. The reduced turnover suggests a tightening of dollar liquidity, which could exert additional downward pressure on the Naira.
With the market grappling with these challenges, it may become increasingly difficult for the CBN to maintain the naira’s value, potentially leading to further depreciation if these conditions persist.
A report by Bloomberg in June 2024 noted that the naira emerged as the worst-performing currency in the world in the first half of 2024.
This was three days after Yemi Cardoso, the governor of the Central Bank of Nigeria (CBN) said he is satisfied with how far the apex bank had been able to manage the currency crisis in the past few months.