Why the naira depreciated against the US dollar in all markets

• The naira crashed against the US dollar again in the official and parallel markets on Thursday, July 11, 2024
• The naira depreciated to N1,554.66 to a dollar in the official market and N1,570 in the parallel market
• Traders exchanged a total of $348.82 million as foreign exchange turnover in the official market

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

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 and banks quote the dollar at new rates as the naira falls in official and parallel markets Credit: Bloomberg/Contributor
Source: Getty Images

FX turnover rises in the official market

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

Data from the FMDQ Exchange shows that traders in the official market quoted the dollar's buying rate at a high of N1,590 and a low of N1,465.

The Nigerian currency also crashed in the parallel market to N1,570 to the dollar, compared to the N1,530 it traded the previous day, leaving a margin of N40 to the dollar in the parallel market.

The between official and parallel markets grows

With the current rate, the gap between the official and parallel markets has widened further by about N16 to a dollar, which analysts say might serve as a honey pot for those who don’t want to go through the official channels to exchange their foreign currencies.

Currency trader Mallam Ishaku Abbas told Legit.ng that the gap is large enough to make Nigerians with dollars want to avoid the official market.

He said:

“If you think of N16 in 1,000 places, you are talking about a lot of money. We have customers who come with over $20,000 and when you multiply N16 by 20,000, you don’t have a choice but to come to the parallel market to sell your dollar.”

He said that despite the gap not being so wide, it still entices traders to patronize the black market.

He disclosed that the only way to eliminate that is for the Central Bank of Nigeria (CBN) to resume Forex sales to BDCs.

“We know the magic that happened in March and April when CBN sold FX to traders. It boosted the naira against the dollar,” he said.

Nigeria’s FX reserves hit a new high

Meanwhile, Nigeria’s external reserves have risen again, hitting $35.05 billion as of July 8, 2024.

Data from the Central Bank of Nigeria indicates that Nigeria’s reserves have increased since July 2024.

Analysis shows that the country’s reserves reached their highest level since May 30, 2023, at N35.09 billion, 14 days before the naira devaluation and foreign exchange unification of June 2023.

This is the first time under President Bola Tinubu that the country’s reserves crossed that threshold.

Nigeria’s reserves rose highest in June

Nigeria’s external reserves were about $35.09 billion when Tinubu assumed office as Nigeria’s president.

Legit.ng earlier reported that data from the CBN shows that Nigeria’s foreign exchange reserve has reached a new high of $34.7 billion after adding $110 million in 24 hours.

The reserve gained about $316 million since the beginning of July.

The naira bounces back against the British pound

Legit.ng earlier reported that the Central Bank of Nigeria (CBN) revealed that the naira appreciated against the British pound in the official foreign exchange market.

In an updated exchange rate on its website, the CBN said the naira exchange rate against the pound closed at N1951.82 /£1 after trading on Wednesday, June 10.

Also, against the euro, the Nigerian currency appreciated by N30.42 to finish at N1,646.39/€1. on Wednesday, July 10.

Source: Legit.ng