The Nigerian naira slightly got weaker against the US dollar on October 25, 2024. It was trading at N1,730 for $1, which is a little drop from the previous rate of N1,728 for $1.
This was the second day in a row that the naira lost some value. Two days before, on October 23, it had gained a little, trading at N1,725 for $1.
However, in a special exchange market called the Investors and Exporters (I&E) window, the naira improved. It ended the day at N1,601.20 for $1, which was better than the previous rate of N1,654.09 for $1.
Since October 15, the naira has been trading above N1,600 in the official exchange market.
The difference between the parallel market rate (unofficial) and the official rate grew larger, to N128.80 compared to the previous day’s difference of N73.91. There was also a big increase, 69%, in money transactions, with a total of $230.99 million compared to $136.68 million before.
The Central Bank of Nigeria’s (CBN) foreign reserves went up by 0.188% to $39.230 billion on October 22, 2024, climbing from $39.156 billion, showing continuous growth for nine consecutive days.
The CBN has been actively working to make the Nigerian currency stable. They’ve made some rules like raising rates to control inflation and balance the economy. They’ve also paid off what they owe in foreign currencies, like money owed to airlines.
Market Trends
This year, 2024, the naira has continuously lost value. At the beginning of the year, it was trading at N838.95 for $1. Then, in February, it dropped past the N1,500 for $1 mark. It made a short recovery in March to N1,300.43 for $1 before hitting a low of N1,660.5 for $1 in October.
In the unofficial or parallel market, the naira started 2024 at N1,215 per dollar. It kept losing value until it hit the lowest yet, at N1,880 in February. Later, it improved to N1,110 in April but has been dropping again to the N1,700 range where it is now.
Key data points
- On October 24, 2024, in a special trading market, the naira went as high as N1,696 per dollar and as low as N1,585.43/$1, then settled at N1,601.20.
- By October 25, 2024, in the parallel market, the naira was at N1,730 per dollar, dropping a tiny 0.12% from N1,728.
- In the I&E window, the currency improved, closing at N1,601.20/$1, marking a 3.30% rise from N1,654.09.
- Trading in the I&E window increased a lot, reaching $230.99 million, more than the previous $136.68 million, showing there was more buying and selling activity.
Important Factors
At a big international meeting, the World Bank and IMF shared a new report saying the Nigerian naira is showing some steadiness because of the Central Bank of Nigeria’s recent efforts.
The IMF noticed the naira is staying steady partly because the CBN has cleared old foreign money issues and raised interest rates.
This report also mentioned that these actions by the local authorities are hopeful. It suggested cleaning up overdue foreign money dealings and higher interest rates are helping the naira become more steady.
What to Expect
Since the naira has crossed into the N1,700 for $1 area, there might be a small improvement soon.
- Oil prices are now steady between $79 and $81 per barrel, and with the Central Bank of Nigeria (CBN) continuously stepping in, it might ease some high price pressures, giving a better outlook for the naira. Also, new plans to lower foreign currency demand might help the naira, possibly pulling it back into the N1,600 for $1 range soon.
- Importantly, the official exchange rate closed at N1,601.20 on October 25 after the CBN intervened with $60 million in the official market on October 17, selling dollars to banks at N1,540.
But, the naira’s path will still be closely linked to larger economic factors, like inflation pressures and the supply of foreign currency. As Nigeria tackles these issues, how policies are put into action will be crucial in deciding if the naira will stabilize or lose more value.