The naira recorded a slight appreciation against the dollar over the past week, despite a substantial reduction in liquidity within the official foreign exchange (FX) market......Read The Full Article>>.....Read The Full Article>>
At the close of trading on Friday, the dollar was quoted at N1,652.25, reflecting a gain of 1.6 percent or N26.62 compared to N1,678.87 quoted at the Nigerian Autonomous Foreign Exchange Market (NAFEM) the previous Friday, based on data from FMDQ Securities Exchange Limited.
However, on a day-to-day basis, the naira depreciated slightly, losing N2.05 as the dollar was quoted at N1,652.25 on Friday, down from N1,650.20 quoted the previous day at the NAFEM.
The foreign exchange market experienced a sharp decline in liquidity during the week. Daily turnover in the FX market closed at $296.63 million on Friday, marking a steep drop of 78.9 percent from the $1.4 billion recorded the previous Friday. On a daily basis, however, turnover increased by 38.14 percent from $214.73 million on Thursday.
In FX trading, market turnover measures the total volume of currency traded over a set period, encompassing both buying and selling activities. However, it does not directly indicate the availability of dollars or other specific currencies in the market.
The local currency showed signs of weakening, closing at N1,745 on Friday compared to N1,740 the prior week, representing a depreciation of N5. This trend was mirrored on a day-to-day basis.
Despite the Central Bank of Nigeria’s (CBN) efforts to stabilise the exchange rate below N1,600, the naira has depreciated by approximately 50 percent year-to-date. As of November 13, 2024, it was trading at N1,698.50 per dollar, according to a report by FBNQuest.
Data from FMDQ indicates that the naira reached an intraday high of N1,700 per dollar on November 7, marking its lowest level since February 2024.
Manufacturers’ Call
The manufacturing sector, a crucial component of Nigeria’s economy, remains vulnerable to FX volatility. According to the FBNQuest report, many manufacturers are struggling with rising production costs, unsold inventory, and weakening demand.
In response to these challenges, the Manufacturers Association of Nigeria (MAN) has urged the Federal Government to address the persistent FX scarcity and escalating dollar rates, which are causing a slowdown in the sector’s growth.
While the CBN’s monetary policies have contributed to an improvement in foreign reserves, ongoing FX volatility and inflationary pressures pose risks to foreign investment. Reduced capital inflows could hinder Nigeria’s economic growth and development.
Data from the CBN shows that the country’s foreign reserves have risen by 21.8 percent year-to-date, reaching $40.2 billion in November, up from $33 billion in January. This marks the highest level since December 2021, when reserves also stood at $40.2 billion. The primary driver of this growth has been an increase in capital inflows from foreign portfolio investors, attributed to the CBN’s tight monetary policy.
