The Nigerian naira has been losing value for the past eight days, mainly because there isn’t enough foreign currency (forex) available in the market. The Central Bank of Nigeria (CBN) has reduced its intervention in the market, leading to a drop in the supply of dollars......CONTINUE READING THE ARTICLE FROM THE SOURCE>>>>>
Why Is the Naira Falling?
Experts say the fall in Nigeria’s foreign reserves is a key reason for the naira’s weakness. Foreign reserves are the country’s savings in dollars and other international currencies, which are used to support the naira. As of this week, Nigeria’s foreign reserves have dropped to $39.154 billion.
Since the CBN is not aggressively supporting the naira, the exchange rate has continued to depreciate:
- At the official market, the naira fell by 0.23%, closing at ₦1,515.06 per dollar (based on data from FMDQ).
- At the parallel market (black market), the naira actually gained some strength, appreciating by 0.32%, closing at ₦1,570 per dollar (according to CardinalStone Limited).
How the Forex Market Is Reacting
According to AIICO Capital Limited, most transactions in the official market were conducted between ₦1,480 and ₦1,520 per dollar today. However, demand for dollars remains high, while supply is still low, putting pressure on the naira.
Impact of Global Oil Prices
Another factor affecting Nigeria’s forex supply is crude oil prices, since Nigeria earns a large portion of its foreign exchange from oil exports. Recently, oil prices declined by over 1%, mainly due to:
- A possible peace deal between Russia and Ukraine, which could stabilize global oil supply.
- An increase in crude oil inventories in the U.S., meaning there’s more supply than demand.
As of today:
- Brent crude dropped to $74.18 per barrel (a $1 decrease).
- U.S. West Texas Intermediate (WTI) crude fell to $70.40 per barrel (a 97-cent drop).
Gold Prices on the Rise
While oil prices are falling, gold prices are rising due to concerns over global trade tensions. Investors often buy gold when there is uncertainty in the global economy.
- Spot gold increased by 0.3% to $2,913.40 per ounce, nearing its record high of $2,942.70.
- U.S. gold futures also went up by 0.4% to $2,941.40 per ounce.
What This Means for Nigerians
- The cost of imported goods may rise because businesses will need more naira to buy dollars for imports.
- Inflation may increase, making basic goods and services more expensive.
- Investors may become cautious, affecting business growth and job creation.
Experts believe the CBN may need to find new ways to stabilize the naira and increase forex supply, such as boosting local production and encouraging foreign investment.