Naira Plummets to One-Month Low as Dollar Liquidity Dries Up
The Nigerian naira continued its downward spiral on Tuesday, weakening for the third consecutive day at the official market (NAFEM) to a one-month low of N1,300 per US dollar. According to data from FMDQ Securities Exchange, the naira’s decline was attributed to a significant drop in dollar liquidity.
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Banking sources revealed to Business Day that investors are exiting the market and seeking safer assets due to escalating geopolitical tensions, which have strengthened the US dollar. This has resulted in a shortage of dollars in the market, putting further pressure on the naira.
On the black market, the naira initially gained some ground in the early hours of Tuesday, following the Central Bank of Nigeria’s (CBN) sale of dollars to Bureau De Change (BDC) operators. However, the gain was short-lived, and the naira closed flat at N1,270 per US dollar by evening, unchanged from Monday’s rate.
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Traders expressed frustration over the tight liquidity in the market, citing a scarcity of dollars. The naira’s continued depreciation has raised concerns about the country’s economic stability and the impact on inflation, trade, and investment.
The CBN has been working to stabilize the naira and boost dollar liquidity, but its efforts have been met with limited success so far. As the geopolitical tensions continue to escalate, the naira’s future remains uncertain.
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