Why the naira crashed in the official market despite inflows

• The Nigerian currency, the naira, has crashed near the N1,600 per dollar mark after a marginal recovery the day before
• Traders in the official exchange rate market quoted the dollar at N1,581.65 per dollar as against the N1,573 it traded the day before
• The development comes despite a surge in FX inflows into the Nigerian economy in the first six months of this year

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

The naira crashed near the N1,600 threshold in the official market on Wednesday, July 17, 2024, after a marginal recovery the previous day.

Traders in the official market quoted the US dollar at N1,581.65 to a dollar, compared to the N1,573 it sold on Tuesday, July 16, 2024.

The naira nears N1,600 per dollar in the official market as dollar inflows improve Credit: Bloomberg/Contributor
Source: Getty Images

Analysts give reasons for the naira’s crash

Data from the FMDQ Exchange shows that the naira crash was unsurprising, as analysts predicted that the Central Bank of Nigeria's (CBN) lack of FX interventions in the market would lead to a massive crash.

In the last FX sales by the apex bank, Bureau de Change (BDC) operators were excluded, which analysts say is the reason for the current naira crash.

On Wednesday, July 17, 2024, Nigerian Autonomous Foreign Exchange Market (NAFEM) traders quoted the spot rate at a high of N1,620 per dollar and a low of N1,500.

FX turnover declines as inflows rise

The foreign exchange turnover in the official market declined to $108.16 from the $138.17 million recorded the previous day.

The development comes amid a surge in FX inflows into the Nigerian economy, which jumped by 57% in one year.

Financial experts attributed the increasing FX inflows to the CBN's consistent policies, which have boosted investors' confidence.

According to reports, Nigeria recorded about $8.86 billion in FX inflows in February this year, higher than the $5.66 billion recorded in the same period last year. The figure represents a 57% increase over the period.

Also, FX turnover rose 180% yearly to $240.64 million in February this year, compared to the $85.80 million recorded in the same period in 2023.

Data from the CBN shows that inflows via the CBN increased by 29% to $3.26 billion in February 2024, compared to the $2.53 billion recorded in the same period the year before.

Naira crushed again in official, parallel markets

Legit.ng earlier reported that despite the relative improvement of foreign exchange turnover in the Nigerian Autonomous Foreign Exchange Market (NAFEM), the Nigerian naira tumbled against the US dollar on Thursday, July 11, 2024.

The naira hit another low in both the official and parallel markets segments of the FX markets, trading at N1,554.65 to a dollar on Thursday, July 11, 2024, as against the N1,534 it traded on Wednesday, July 10, 2024.

Traders in the FX market exchanged $348.82 million as Forex turnover in the official market.

Source: Legit.ng