Exchange rate crashes to N1,611/$1, worst close since March

The exchange rate between the naira and the dollar fell to a four-month low of N1,611 on the official Investor and Exporter window on Monday, July 29th, 2024.

This is according to data from the FMDQ, where currencies are traded officially.

The depreciation of the naira on the first day of the week reversed the gains experienced at the end of last week as the apex bank sold forex to traders.

What the data is saying

Data from the FMDQ indicate the naira closed at N1,611.40 on Monday, July 29th, 2024, compared to the close of N1,609 on Friday.

• Intra-day highs and lows also printed N1,622/$1 and N1,500/$1, suggesting a wide disparity across rates on the official market.
• Market turnover recorded $179.34 million compared to $168.3 million on Friday. Total market turnover recorded in July so far is about $3.7 billion compared to $3.3 billion in the whole of June 2024.
• On the parallel market, where the exchange rate is sold unofficially, traded quoted exchange rates ranged between N1,590 and N1,600, slightly lower than the official rate.
• The exchange rate has now depreciated by 7% in July, the worst monthly drop since February when it fell 9%.
• January remains the worst this year with a monthly drop of 60%.
• Nigeria’s exchange rate against the United States dollar has depreciated by as much as 77.6% this year due to forex policies meant to introduce exchange rate stability.

Nigeria’s external reserves remained around $36.5 billion as of July 26th, 2024.

Why the depreciation

Nairametrics analysts observed that the depreciation of the exchange rate started around late June when it crossed N1,500/$1 for the first time since May.

• Rates remained depressed well into early July and then rapidly declined as we approached the middle of the month.
• By July 10th, the exchange rate had depreciated to N1,560 and has declined further since then.
• Sources suggest the depreciation is a result of increased demand pressure from importers who are looking to restock inventory, equipment, and raw material inputs.

Nairametrics also understands that demand pressure is arising from autonomous sources on the retail and investor end of the market.

What you should know 

Nairametrics reported last week that the exchange rate fell to a four month low at N1,603 forcing the apex bank to sell around $148 million to forex traders at the retail end of the market.

• The sale was the third to authorized FX dealers this month as the CBN attempts to boost liquidity in the FX market. 
• Just last two weeks, the CBN announced the sale of $106.5 million as foreign exchange (FX) to 29 FX dealer banks. 
• Meanwhile, the federal government has announced plans to issue $500 million in domestic foreign currency-denominated bonds in three to four weeks’ time. 
• Wale Edun, the Minister of Finance and Coordinating Minister of the Economy. Edun said this during a quarterly press briefing in Abuja, themed ‘Economic Recovery and Growth: Progress and Prospects 2024’.