Naira Weakens Against US Dollar, Pound, and Euro in Official Forex Market
The Nigerian naira has experienced a significant depreciation in the official foreign exchange market, falling by N4.07 against the US dollar on Wednesday, March 25. This decline represents a 0.29% drop, with the naira trading at N1,386.70 per dollar, down from N1,382.63 per dollar the previous day.
Factors Driving the Naira's Decline
The weakening of the naira is primarily attributed to high demand for foreign exchange coupled with limited supply from the Central Bank of Nigeria (CBN) and other sources. Notably, the CBN has recently halted its foreign exchange sales to eligible financial institutions, where Bureau de Change (BDC) operators typically access $150,000 weekly. This supply shortage has intensified pressure on the currency.
In addition to the dollar, the naira also depreciated against other major currencies in the official market:
- The British pound sterling rose by N7.52, closing at N1,856.38 per pound, compared to N1,848.86 previously.
- The euro gained N5.82, trading at N1,605.80 per euro, up from N1,599.98.
Retail and Black Market Impacts
The depreciation extended to retail and black markets, further highlighting the currency's struggles. At GTBank's foreign exchange desk, the naira fell by N3, selling at N1,391 per dollar, an increase from N1,388. In the black market, it depreciated by N5, quoting at N1,427 per dollar.
Abdullahi, a BDC trader, provided insights into current rates, stating, "The dollar is being bought at N1,407 and sold at N1,427. The British pound sterling sells for N1,885 and is bought at N1,850. The euro is selling at N1,625, with a buying rate of N1,590."
Underlying Causes and Analyst Perspectives
Analysts point to several factors contributing to the naira's depreciation. The prolonged conflict in the Middle East has heightened global risk aversion, reducing appetite for emerging-market assets like Nigeria's, despite attractive yields. While offshore inflows may offer some near-term support, structural challenges persist.
Efforts to bolster foreign exchange earnings include reviewing timelines for resuscitating moribund oil wells and increasing production, which accounts for over 60% of Nigeria's foreign currency earnings. These measures aim to address the ongoing supply shortage that continues to pressure the naira.
Latest CBN Exchange Rates and Reserve Updates
The Central Bank of Nigeria has released updated exchange rates for various currencies, reflecting the current market conditions:
- CFA: N2.44
- Yuan/Renminbi: N200.93
- Danish Krona: N214.91
- Euro: N1,605.80
- Yen: N8.72
- Riyal: N369.61
- South African Rand: N81.89
- SDR: N1,891.19
- Swiss Franc: N1,752.66
- Pounds Sterling: N1,856.38
- US Dollar: N1,386.70
- UAE Dirham: N377.51
On a positive note, Nigeria's foreign exchange reserves have risen to a five-year peak of $43.4 billion, as announced by Mohammed Abdullahi, the CBN deputy governor for economic policy. This increase reflects positive investor responses to recent economic reforms, discussed at the Nigeria Investors Forum in Washington, D.C., during the IMF World Bank Annual Meetings.
