Naira’s Decline: CBN Report Reveals 49.60% Depreciation in 3 Months
In the third quarter of 2023, the Central Bank of Nigeria (CBN) disclosed a significant 49.60% depreciation in the average naira/dollar exchange rate, reaching N764.82/US$. This economic shift is attributed to fluctuating global oil prices impacting Nigeria’s foreign currency earnings.
Naira To Dollar Foreign Exchange Dynamics
The report indicates a net foreign exchange inflow of US$8.22 billion, with a 1.6% increase to US$16.34 billion compared to the preceding quarter. While foreign exchange inflow through the Central Bank rose, autonomous sources experienced a decrease.
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Imbalances in the Market
Rising imports and reduced oil income have led to an increased demand for dollars, further pressuring the naira. Notably, essential goods and services continue to contribute to this imbalance, intensifying the strain on the foreign exchange market.
Inflow and Outflow Trends
Foreign exchange outflow through the economy rose by 9.7%, reaching US$8.12 billion. CBN’s outflow increased by 13.1%, contrasting a decrease in autonomous outflow by 11.0%. Consequently, net foreign exchange inflow decreased by 5.4% to US$8.22 billion.
External Reserves Overview
The report highlights that despite the challenges, external reserves remain robust, standing at US$32.79 billion, covering 6.3 months of import for goods and services. A breakdown reveals a substantial holding by the CBN, the Federal Government, and the Federation.
Currency Composition
US dollars dominate the external reserves at 75.7%, followed by Special Drawing Rights (13.5%), Chinese Yuan (9.7%), British Pounds (0.6%), and Euro (0.5%). Other currencies account for the remaining balance.
In summary, the CBN report underscores the challenges posed by global economic dynamics on Nigeria’s currency. The depreciation signals a need for strategic measures to stabilize the exchange rate and ensure economic resilience.
Note: All figures are based on the Central Bank of Nigeria’s economic report for the third quarter of 2023.
