Story Highlights
- Nigeria’s exchange rate closed June 2024 at N1,503.3/$1, marking a 1.3% depreciation for the month.
- Despite breaking the N1,500/$1 barrier, the exchange rate stayed pretty steady, moving between N1,470 and N1,503.
- This is the first month of stable exchange rates since the Central Bank of Nigeria made big changes, even though the naira lost 40% of its value since December 2023.
Nigeria’s exchange rate ended June 2024 at N1,503.3 for $1, showing a 1.3% drop for the month.
Even though it went over N1,500 per dollar, the exchange rate stayed pretty stable.
Research from Newslodge shows it bounced between N1,470 and N1,503 in June, staying within a small 2% range.
This trend is the first time exchange rates have been steady since the Central Bank of Nigeria (CBN) made big changes to how foreign exchange works.
But, Nigerians are still seeing lots of ups and downs, as the naira lost 40% of its value from December 2023 to the end of June 2024.
At the end of 2023, the exchange rate was N907.11 for $1. It then had lots of ups and downs, ending the first half of 2024 at N1,503 for $1.
What the data shows
The first half of 2024 saw the exchange rate go up and down a lot, showing Nigeria’s economic problems and the impact of new policies.
In January, it jumped from N907.11 for $1 on December 29, 2023, to over N1,000 for $1 in early January, then dipped, and rose again to end January at N1,348.62 for $1.
In February, the exchange rate continued to rise, peaking at N1,665.50 for $1 on February 23, the highest for the first half of the year. This was a time of continued drops before some stability at the month’s end.
March saw a slow drop, from N1,548.25 for $1 at the start to N1,309.39 for $1 by March 28, showing some recovery and steadiness at the end.
In April, the exchange rate moved between N1,136 and N1,339, but started rising again, ending April at N1,419.11 for $1.
May kept seeing changes, with the rate moving between N1,354 and N1,533, ending at N1,485.99 for $1.
June 2024 brought some steadiness with the rate hovering between N1,473 and N1,510, closing at N1,505.30 for $1, a 1.3% drop for the month.
This steadiness in June hints that the CBN’s changes might be starting to calm the foreign exchange market.
Key CBN policies in the first half of 2024
A little over a year ago, the Central Bank of Nigeria merged all parts of the forex market.
Since then, the bank has made many changes to increase the supply of foreign money and lower demand restrictions.
In the last six months, the CBN issued over 15 new rules to make the market more open.
To save foreign money and protect the Naira’s value, the CBN changed how International Money Transfer Operators (IMTOs) work, making their services only for incoming money with mandatory Naira payouts. This affects companies like Western Union and MoneyGram and aims to stabilize the market.
The bank also made it harder to buy foreign money through Bureau De Change (BDC) dealers, focusing on costs for education and medical needs abroad. They sold foreign money to BDCs at least four times in the first half of 2024 and settled overdue forex transactions.
The bank also addressed suspected hoarding of foreign money by Nigerian banks, requiring them to sell extra dollars by February 1, 2024, to stabilize the exchange rate.
Another rule removed limits on the spread between buy and sell rates in interbank foreign exchange transactions and lifted restrictions on sales.
The bank also targeted international oil companies, changing guidelines on their forex inflows. They stopped these companies from sending out 100% of their inflows but allowed them to sell 50% of their repatriated export earnings to authorized forex dealers.
The 40% drop in the naira’s value suggests some doubt about the CBN’s forex policies.
What you should know
Newslodge reported that the Nigerian Autonomous Foreign Exchange Market (NAFEM) is set to see its lowest forex turnover in five months by June 2024, as dollar scarcity pressures the naira.
The Nigerian forex market’s problems continue despite various policies by the CBN aimed at stabilizing the market and finding the naira’s real value.
The ongoing naira depreciation and lower forex turnover show the liquidity issues in Nigeria’s economy.
To tackle rising inflation and attract foreign investors, the CBN raised the Monetary Policy Rate (MPR) by a total of 750 basis points from January to May 2024.
This followed the CBN Governor, Yemi Cardoso’s call with foreign investors in February. As a result, the fixed income and money markets saw high yields across T-bills, OMO, and bond auctions. However, forex liquidity remains a big problem, driven by high demand and low supply, causing the naira’s steady decline.
On a positive note, Nigeria’s foreign reserves went up to $34.07 billion by June 26, 2024, up from $32.69 billion at the start of the month.
This rise could be due to the CBN’s reduced intervention in the forex market and better export earnings from higher crude oil output.