Emmanuel OchayiThe Nigerian naira faced a 2.71% depreciation against the dollar on Friday, closing at N885.88/$1.
The situation, compounded by a 22% reduction in forex turnover to $92.16 million, has sparked worries about potential impacts on the imminent Christmas holiday.
Addressing the unfolding situation, financial experts have highlighted various underlying factors contributing to the naira’s weakness.
Increased demand for foreign currency ahead of the festive season, coupled with ongoing worries regarding Nigeria’s oil production and global economic uncertainties, are among the key concerns.
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Analysts stress the importance of confidence among market participants for currency stability. Olatunde Amolegbe, the former President of the Chartered Institute of Stockbrokers, emphasized the critical role of confidence in attracting foreign investments and retaining local assets.
He acknowledged the positive implications of clearing FX commitments but suggested that their effects might be seen in the medium term rather than immediately.
Bismarck Rewane, Managing Director/CEO of Financial Derivatives Company Limited, echoed concerns about the naira’s volatility due to persistent worries over forex supply.
He indicated the likelihood of speculative buying, with more market participants opting for long positions on the dollar while betting against the naira.
The depreciation of the naira could have potential implications for Christmas spending, making imported goods more expensive.
However, the Central Bank of Nigeria has assured the public of its commitment to maintaining exchange rate stability and taking necessary measures to address the situation.
The ongoing challenge underscores the need for structural changes, including enhancing security, improving infrastructure, fostering foreign direct investments, and encouraging local production, as emphasized by financial experts.
Amidst lingering concerns, market participants remain watchful of the naira’s performance in the coming days.
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