On Tuesday, the Nigerian Naira experienced a sharp decline, hitting an unprecedented low against the US dollar in both official and parallel markets.
According to FMDQ data, the currency depreciated by 8.9%, dropping from N778.80/$1 to N848.12/$1 in the official market.
This drastic fall was triggered by a remarkable 212% surge in forex supply, rising from $43.09 million to $134.8 million. Throughout the day, intraday rates fluctuated between N700.00 and N981.00 before stabilizing.
Simultaneously, in the parallel market, the Naira traded at N1,050/$1, a slight increase from the previous rate of N1,040/$1. This rise was attributed to a shortage in dollar circulation and heightened demand, pushing the unofficial rate to N1,060/$1. Consequently, a significant gap of N201.88 emerged between the markets, with a market margin of 24%.
Tuesday’s depreciation marked an 80% decline since June 13, 2023, before the radical forex reform on June 14, when the Naira traded at N472/$ and N768/$ at the official and parallel markets, respectively.
Street currency dealers in Lagos sold the Naira between N1,040 and N1,049/$, with the total activity volume surging to $234.28 million from Monday’s $43.09 million.
The Central Bank of Nigeria (CBN) had previously announced its intention to implement a “managed float” regime, intervening as necessary. Tuesday’s depreciation is viewed as a deliberate move by the central bank, allowing the Naira to freely fluctuate, aiming to bridge the gap between official and parallel markets.
