Naira falls against dollar to N885.88/$1 as forex turnover drops by 22% ahead of Christmas 

The Nigerian naira weakened against the dollar on Friday, December 22nd, 2023, falling 2.71% to close at N885.88/$1.

This decline, coupled with a 22% drop in forex turnover to $92.16 million, has raised concerns about potential impacts on the upcoming Christmas holiday.

Data from the NAFEM, the platform where forex is officially traded, showed the naira’s loss representing a N23.97 depreciation compared to its Thursday close of N861.91.

Analysts attribute the naira’s weakness to a combination of factors, including increased demand for hard currency ahead of the Christmas holidays and continued concerns about Nigeria’s oil production and global economic uncertainties.

The domestic currency depreciated 2.71% to close at N885.88/$1 to a dollar at the close of business on Friday, data from the NAFEM where forex is officially traded, showed.

This represents an N23.97 loss or a 2.71% decline in the local currency compared to the N861.91 it closed on Thursday.

The intraday high recorded was N1248/$1, while the intraday low was N700/$1, representing a wide spread of N548/$1.

According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $92.16 million, representing a 22% decrease compared to the previous day.

Similarly, the naira depreciated at the parallel forex market where forex is sold unofficially, the exchange rate depreciated by 0.16%, quoted at N1230/$1, while peer-to-peer traders quoted around N1163,35/$1.

The naira’s depreciation could have implications for Christmas spending, as it makes imported goods more expensive. However, the Central Bank of Nigeria has assured the public that it is committed to maintaining exchange rate stability and will take necessary measures to address the situation.

What financial experts are saying

The former President and Chairman governing council of, the Chartered Institute of Stockbrokers (CIS) and the Managing Director, of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe in an exclusive chat with Nairametrics said for the exchange rate to be stable, market and participants confidence is key.

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“Confidence is what makes foreigners want to come to invest in your country and make locals want to keep their investments here.

“In the absence of these dynamics, demand will naturally outstrip supply and you see the sort of instability we are experiencing now.

“I think the decision to clear FX commitment backs will be positive for market confidence, but the desired impact might manifest in the medium term rather than in the short run.

“I also think the efforts at using monetary policy tools to reduce system liquidity could ultimately reduce currency speculation but again it’s not a silver bullet.

“Deliberate efforts need to intensify at effecting structural changes that will encourage import substitution such as improved security, better infrastructure increased foreign direct investments, and encouraging local production,” he said.

Managing Director/CEO, of Financial Derivatives Company Limited, Bismarck Rewane had said in a report that the naira is expected to remain volatile on lingering forex supply concerns.

The dollar dearth means speculative buying is likely to continue, with an increasing number of market participants taking long positions on the dollar while shorting the naira.