Emmanuel OchayiAmidst a 13.78% plunge from its Wednesday closing rate, the Nigerian naira tumbled to N956 against the US dollar on Thursday, marking a distressing downturn in the forex market.
According to data sourced from the FMDQ Securities Exchange, the alarming drop was exacerbated by 46.77% decrease in dollar supply, plunging trading confidence.
Speaking on the disconcerting trajectory, financial analysts voiced concerns over the lingering volatility plaguing the naira despite interventions by the Central Bank aimed at resolving the backlog of foreign exchange contracts. “The persistent instability of the naira is disquieting, reflecting a 40% decline in value since June,” revealed the World Bank.
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In a revelation, the Economic Intelligence Unit of the Economist Group highlighted the limitations faced by the Central Bank in tackling the backlog of foreign exchange orders. The unit cautioned that Nigeria’s monetary policy lacks the necessary vigor to provide ample market support or address the backlog, keeping foreign investors on edge.
“The unsupportive monetary policy in Nigeria portends ongoing pressure on the naira, while the central bank’s insufficient capacity to meet market demands remains a concern,” stated the Economic Intelligence Unit.
They further emphasized that high inflation and a persisting gap with the parallel market would perpetuate an erratic exchange rate regime, potentially leading to intermittent devaluations.
Echoing concerns over the naira’s vulnerabilities, market observers are apprehensive about the sustained pressure that the forex market might endure, underscoring the need for robust interventions to stabilize the currency’s trajectory.
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