How the naira weakened against pound, gains against the dollar

• The Nigerian currency, the naira, depreciated against the British pound in the parallel market
• Traders in the black market quoted the naira at N2,113.8 following sustained pressure from travellers and importers
• The development comes amid naira’s massive gains against the US dollar in the official market

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

The Nigerian currency, the naira, weakened against the British pound in the final trading day of the week, with the pound hitting N2,112.8 in the parallel markets.

The decline shows a continued depreciation of the local currency against major currencies worldwide, including the dollar and the euro, over the last three months.

The Nigerian currency, the naira trades low against the British pound and rises against the dollar Credit: Novatis
Source: Getty Images

Importers and travellers mount pressure on the naira

Pressure from importers and travellers on the FX market has weakened the naira.

According to The Sun, the Retail Dutch Auction System (rDAS) introduced by the Central Bank of Nigeria (CBN) failed to prop up the naira’s value.

Other factors, such as low oil output, petrol subsidies, and limited liquidity, have hindered the strength of the naira in foreign exchange despite an increase in the country’s FX reserves.

Reports say the impending US Non-Farm Payrolls (NFP) data for August is the centre of attraction for the market as it may impact the US Federal Reserve interest rate choices

ADP’s August job growth statistics fell below forecast, sparking worries about a possible recession.

The naira gains massively against the dollar

The development comes as the naira's value in the official foreign exchange market improved against the US dollar for the second time in September on Friday. 

According to data from FMDQ Securities, the naira closed at N1,593.32/$ at the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, September 6, 2024.

Friday's exchange rate represents a 46.09 appreciation compared to the N1,639.41/$1 closing rate on Thursday, September 5. 

The appreciation is the first for the naira in three days at the foreign exchange market. 

The naira's strong performance comes as the dollar supplied by willing sellers and willing buyers surged by 244.4% to $245.17 million on Friday, compared to $71.18 million recorded on Monday at the NAFEM. 

On a day-on-day basis, the dollar supply rose by 31.96% on Friday from $185.79 million recorded on Thursday. 

Naira loses its grip in the black market

However, in the parallel market, also known as the black market, the naira lost N25 in five trading days to close at N1,660 on Friday, while N1,635 closed on Monday. 

On a daily trading basis, the local currency steadied at N1,660 on the black market. 

CBN adjusts exchange rates

Legit.ng earlier reported that the naira crashed to a new low on Thursday, September 5, 2024, following continued volatility in the FX markets.

The Nigerian foreign exchange market recorded a low turnover as dollar supply grew thin in the Nigerian Autonomous Foreign Exchange Market (NAFEM).

The naira crashed to a new low on Thursday, September 5, 2024, following continued volatility in the FX markets. The Nigerian foreign exchange market recorded a low turnover as dollar supply grew thin in the Nigerian Autonomous Foreign Exchange Market (NAFEM).

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Source: Legit.ng