Naira Loses More Value As Demand Pressure Continues – See Latest Update

The Depreciation of Nigerian Currency: Let’s take a Closer Look at the Forex Market

The Nigerian currency, Naira, has been facing significant challenges in maintaining its value against foreign currencies. In both the official and black foreign exchange (forex) markets, the Naira has experienced a consistent struggle, losing ground against major currencies like the US dollar, pound, and euro.

Naira’s Depreciation in Forex Markets

According to recent data, the Naira has been depreciating against the US dollar and other foreign currencies at the forex market. At the official market, the Naira closed the trading week ending July 28, 2023, with a value of N775.76 against the dollar, indicating a 0.93% drop compared to the previous day’s exchange rate of N768.60.

However, there is a glimmer of hope as, on a week-on-week comparison, the Naira showed a very slight improvement in value, increasing by N2.06 or 0.26% compared to the exchange rate of N777.82/$1 on Friday, July 22.

Naira’s Performance at the Black Market

The unofficial forex market, commonly known as the black market, tells a different story. The Naira closed the week trading at N870 against the US dollar, marking a depreciation of 0.34 percent compared to N867 earlier in the week.

The exchange rates against the Pound Sterling and the Euro at the unofficial market were N1,165/£1 and N942/€1, respectively.

Expert Insights: Johnson Chukwu’s Explanation

Johnson Chukwu, the Group Chief Executive Officer of Cowry Assets Management, has shed light on the reasons behind the Naira’s struggle against foreign currencies. According to him, the key issue lies in the lack of stability in Nigeria’s currency exchange rate system, leading to a fall in the value of the Naira.

Chukwu emphasized the critical importance of stability in the exchange rate, as it significantly impacts people’s confidence in the economy. An unstable exchange rate generates uncertainty, eroding investor confidence and potentially triggering panic among stakeholders.

The Significance of Exchange Rate Stability

Chukwu underlines that the numerical value of the exchange rate may not be the primary concern for many. Instead, what matters is the rate’s ability to establish a level of stability. With stability, uncertainties are minimized, and confidence among economic agents remains intact. Without it, the risk of declining confidence and panic increases, which could further exacerbate the depreciation of the Naira.

Conclusion

The struggle of the Nigerian currency, Naira, against foreign currencies in the forex market necessitates urgent measures to achieve exchange rate stability. Ensuring stability is vital for fostering investor confidence and bolstering the overall economic landscape. Addressing the factors contributing to the Naira’s depreciation can play a crucial role in stabilizing the exchange rate and reinforcing Nigeria’s economic foundation.