Short-term conditions for the naira deteriorated as the country’s headline inflation figures increased to a three-decade high in May, and the naira’s value declined on the official market.
The naira lost 0.45% of its value after trading on Friday, according to data from the FMDQ Securities Exchange Limited. The dollar was quoted at N1,482.72, down from N1,476 on Thursday at the Nigerian Autonomous Foreign Exchange Market.
Dollar supply jumped by 96.6% on Friday to $183.47 million from $92.68 million on Thursday because to voluntary sellers and buyers.
From N1,500/$1 given on Thursday, the intraday high declined to N1,490 against the US dollar on Friday.
Read Also: Breaking: Nigeria’s inflation rises to 33.95% in May 2024
Nigeria’s inflation rate at three decade-high
Data from the National Bureau of Statistics revealed that consumer prices increased by an annual 33.95%, up from 33.7% in April. Food prices rose due to increased costs for meat, fish, and potatoes. Food inflation increased from 40.3% in April to 40.66% in May, while core price growth, which excludes energy and agricultural products, accelerated to 27% from 26.8%. Inflation was also fueled by the naira’s rapid decline against the US dollar since June of last year.
The weakening currency has raised import prices on food. Nigeria’s economy heavily depends on imports, and Nigerian importers are purchasing items at exorbitant costs. Higher tariffs resulting from the naira’s depreciation have further increased the prices of some goods.
Nevertheless, there might be some respite for the naira in the mid-term. A $2.25 billion package, approved by the World Bank, was given to Nigeria to stabilize the economy and increase aid to the poor and vulnerable to economic shocks, given that, after India, Nigeria has the largest proportion of impoverished individuals worldwide. The funds will also bolster the nation’s foreign exchange reserves, supporting the naira.
The dollar index experienced volatility. The Federal Reserve meeting on Wednesday and the release of US inflation statistics caused significant swings in the dollar’s value. Following the release of the inflation statistics, which showed a slight slowdown from the previous month, the dollar index initially fell sharply.
