Demand Forces Naira To Retreats To 1,400/$

On Thursday, the illicit market saw the Nigerian naira drop to N1,400 versus the US dollar as a result of fresh demand pressure in the foreign currency (FX) market.

When comparing the current currency rate to the N1,125 per dollar quoted on April 12, 2023 on the parallel market, often known as the black market, the naira has lost 19.64 percent in just two weeks.

 Wednesday’s naira depreciation at the Nigerian Autonomous Foreign Exchange Market (NAFEM) was N1,308.52 per US dollar.

Compared to the level on April 12, 2024, the naira has weakened by 12.69 percent from N1,142.38 per dollar in the last two weeks, according to data from the FMDQ Securities Exchange.

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Lack of hedge exposes foreign investors

The naira has retreated this week as dollar liquidity dips on the back of the exit of some foreign portfolio investors who have been spooked by the Israel-Hamas war and a stronger dollar.

“There’s a lack of hdege- no NDFs and no ETDs- so FPIs are exposed to the Israel-Hamas war and with a statement of no intention to intervene by the CBN, they are selling their fixed income securities to take out their capital,” a source familiar with the matter told BusinessDay.

“The market needs exchange rate hedging products to manage volatility,” the source said.