The naira has depreciated to a two-month low, trading at N1,545 per dollar in the parallel market segment of the Nigerian Foreign Exchange Market. According to trade figures from Bureau de Change operators in Lagos and Abuja, the currency fell by 0.65 percent, or N10, from N1,535 on Monday to N1,545. This marks the weakest exchange rate since May 14, 2024, when the naira traded at N1,550 per dollar.
This depreciation occurs despite the growing foreign exchange reserves, which the Central Bank of Nigeria (CBN) measured at $34.77 billion as of July 5, 2024. The value of the gross FX reserves has increased by $2.2 billion from $32.55 billion on May 14, 2024. However, this increase has not translated into strengthening the struggling naira.
Nigeria is currently facing an inflation rate of 33.75 percent, exacerbated by economic reforms, including the partial removal of petrol subsidies and the managed float of the naira. Since introducing the ‘Willing buyer, willing seller’ FX model last year, the naira has depreciated by more than 100 percent. In February, the CBN reintroduced weekly sales of $20,000 to Bureau de Change operators to moderate prices. However, the intervention was abandoned due to its failure to meet expectations.
In April, Central Bank Governor Olayemi Cardoso stated that the reserves are not used to defend the naira, following a marginal gain in the currency. “The shift in our reserves has little or nothing to do with defending the naira and that is certainly not our objective,” he said. Bala Bello, a CBN Monetary Policy Committee member, noted at the 295th meeting that “the pressure on the naira reflects supply and demand imbalances in the foreign exchange (FX) market.”
