Naira’s Steep Fall By 38.9%, Threatens Businesses and Jobs
Naira Crisis Intensifies: Businesses on Edge as Currency Hits Record Low.
In the last three months, the Nigerian naira has taken a significant hit, dropping by 38.9% against the US dollar at the Central Bank of Nigeria’s official Investors & Exporters (I&E) window, according to data from FMDQ Securities Exchange.
From October 3, 2023, to January 3, 2024, the naira fell from N745.19/$ to N1035.12/$. Despite the government’s efforts to stabilize the foreign exchange market, the naira’s value has continued to decline.
Manufacturers and members of the organized private sector, including the Manufacturers Association of Nigeria and the Lagos Chamber of Commerce and Industry, express concerns about the negative impact on their businesses. The falling naira value could lead to downsizing and increased unemployment.
The naira, starting 2024 at N988.46/$, experienced an 8.97% decline and further dropped to N1035.12/$ on January 3, marking the third time it closed above N1000/$ on the I&E window.
Efforts to address the situation, such as clearing FX backlogs and foreign exchange support facilities, have not yielded positive results. The World Bank highlights the persistently low volume of FX trades in the official window, raising risks for foreign direct investment and portfolio investment.
The Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, acknowledges the issue and states that the bank is working on comprehensive policies to address market volatility. However, concerns linger among the organized private sector, with fears that prolonged foreign exchange scarcity may force more companies to shut down operations in Nigeria.
In June 2023, the CBN removed the rate cap on the naira at the I&E window, aiming for a free float to unify exchange rates. Despite initial positive reactions, the naira fell sharply, and since then, it has depreciated by 36% to N908 as of January 7, 2024.
While the CBN cleared a $7bn backlog in November, the naira continued to depreciate, closing at N831 on the official market by the end of that month. The current state of the naira poses a serious threat to Nigeria’s economic stability, warranting urgent and comprehensive measures to address the ongoing foreign exchange challenges.
