Why naira depreciated to a 6-month low in the official market

• The naira crashed to a six-month low of N1,625 on Wednesday, September 4, 2024, in the official market
• Traders in the official market quoted the naira at a high of N1,640 per dollar and a low of N1,400, representing a wide margin in the FX market
• The naira’s depreciation comes amid an increase in petrol prices by the NNPC across the country

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

The FX rate between the naira and the US dollar declined to a six-month low of N1,625.88 per dollar in the official market on Wednesday, September 4, 2024, amid low turnover.

The naira’s crash is the lowest exchange rate since March 8, 2024, when it traded at N1,627.4 per dollar.

The naira depreciates to the lowest in the official market Credit: Bloomberg/Contributor
Source: Getty Images

Dollar supply declines in the official market

Data from the FMDQ Exchange shows that the naira’s fall on September 4, 2024, represents a 0.89% fall from the previous day’s rate of N1,611.34 per dollar

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Traders in the official market quoted the naira at a high of N1,640 per dollar and a low of N1,400, representing a wide margin in the FX market.

The foreign exchange turnover for September 4, 2024, stood at $205.76 million, a marginal decline of 1.84% compared to the previous day’s record of $209.61 million.

Experts believe that the drop in the FX rate shows a disturbing pattern for the naira.

The Nigerian currency plummeted amid a hike in petrol prices by the Nigerian National Petroleum Company Limited (NNPCL), adding to the acute shortage of the product nationwide.

Naira depreciation sets amid low dollar supply

A previous report by Legit.ng disclosed signs that another round of naira depreciation has begun following increased demand amid a growing supply gap.

Meanwhile, in the parallel segment of the foreign exchange market, the naira appreciated to trade at N1,595 per dollar as of Wednesday, September 4, 2024.

Analysts predict more depreciation

Financial analysts believe the naira's volatility will continue as more people seek funds for summer travel, school fees, and medical trips abroad.

Janet Ogochukwu, banker and financial analyst, disclosed that the pressure on the naira is due to importers’ demands following the 150-day duty-free import window provided by the Nigerian government.

“There is a lot of demand by importers seeking to beat the deadline for importing essential food items into the country. I am sure the pressure on the local currency will continue until December, marking the lapse of the duty-free import window,” she said.

The gap between official black markets widens

Legit.ng earlier reported that signs of another round of naira depreciation have followed increased demand amid a growing supply gap.

On Tuesday, September 3, 2024, the naira deprecated to N1,635 per dollar in the parallel market from N1,625 per dollar it traded on Friday, August 29, 2024.

Meanwhile, data from the FMDQ Exchange shows that the official exchange rate depreciated to N1,611.34 per dollar from N1,598.56 per dollar.

Source: Legit.ng