How the naira crashed against the dollar in the official market

• The naira crashed again after appreciating to N1,500 per dollar in the official market on Monday, July 22, 2024
• The Nigerian currency reversed its gains in the official market, trading at N1,548.76 per dollar in the official market
• In the parallel market, the naira also crashed, trading at N1,580 per dollar from the N1,560 it traded the day before

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.

After trading for N1,500 per dollar on Monday, July 22, 2023, the naira reversed its gains on Tuesday, July 23, 2024, to trade at N1,548.76.

Monday’s gain is the highest the naira has traded since March, when the Central Bank of Nigeria (CBN) intervened in the foreign exchange market by selling dollars to Bureau de Change (BDC) operators.

The Nigerian currency the naira fell at gaining almost N100 against the US dollar Credit: Bloomberg/Contributor
Source: Getty Images

CBN sells dollars to BDCs

However, the naira’s crash on Tuesday comes amid Forex sales by the CBN to BDC operators who were sidelined in the first round of sales.

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Data from the FMDQ Exchange shows that traders quoted the dollar's spot rate at a high of N1,610 and a low of N1,470.

Foreign exchange turnover improved, rising to $280.92 million on Tuesday, July 23, 2024.

Experts predict new interest rates

Financial experts predicted that the naira might stabilize at N1,500 before year-end as the CBN pumps more FX into the markets.

Additionally, the naira also crashed in the parallel segment of the Forex market on Tuesday, July 23, 2024, trading at N1,580 from the N1,560 it traded on Monday, July 22, 2024.

Currency traders have applauded the apex bank for intervening in the FX markets and urged it to sustain the momentum to keep the local currency afloat.

Abebe Osas, an FX trader, said he was delighted when the CBN announced another round of FX sales to BDCs.

“Currently, demand for the US dollar is moderate and might increase as we head to the peak season. The peak season usually occurs between September and October when demands rise due to school fees, vacations, and imports.

“The CBN should intervene more in those periods to avoid the naira collapsing to N1,600 per dollar.”

CBN hikes interest rates

The development comes amid the CBN raising interest rates by 50 basis points to 26.75% from 26.25%.

The Monetary Policy Committee Meeting of the Central Bank of Nigeria (CBN) has increased the monetary policy rate (MPR) by 50 basis points from 26.25% to 26.75.

Olayemi Cardoso, the governor of the Central Bank of Nigeria (CBN), said the continuous increase in interest rates was based on the rise in food and core inflation.

Inflation rate forces interest rate hike

He called on fiscal authorities to address inflationary pressures on the economy.

The CBN adjusted the asymmetric corridor around the MPR from +100/-300 to +500/-100 basis point.

Reports say the MPC left commercial banks' cash reserve ratio (CRR) and liquidity ratio at the same rate.

The MPC stated that the persistent food and energy inflation has piled enormous pressure on the economy and Nigerians.

The CBN boss disclosed that the food crisis in Nigeria has affected the prices of other items.

Naira trades at new Rates against the pound, euro

Legit.ng earlier reported that on Sunday, July 21, 2024, the Nigerian currency, the naira, experienced a mixed performance in the foreign exchange market, with varying rates at the parallel and official markets.

According to Bureau de Change (BDC) operators in the parallel market, traders bought the euro and pound and sold at N1,570 and N1,580 to the dollar, respectively.

The naira also traded N2,020 and N2,070 to the pound and N1,650 and N1,700 to the euro.

Source: Legit.ng