Naira Nosedives into Historic Low, Fueling Economic Concerns Ahead of the Festive Season
The Nigerian Naira experiences a significant depreciation, reaching a historic low against the US Dollar, raising worries about economic impacts and holiday spending.
On December 8th, 2023, the Nigerian Naira plummeted to an all-time low, closing at N1,099.05 per dollar in the official market. This 23.29% depreciation compared to its previous closing rate is a cause for concern, especially just weeks before the Christmas holiday.
This marks the first instance of the Naira crossing the N1,000/$ threshold, highlighting a substantial devaluation and sparking anxieties about its repercussions on the economy.
Despite recent efforts by the Central Bank of Nigeria (CBN) to stabilize the foreign exchange market, the Naira’s decline persists, intensifying worries about its impact on the upcoming holiday season.
The depreciation is expected to contribute to existing inflationary pressures, adding strain to household budgets, particularly for those reliant on imported goods. Businesses, both large and small, may face challenges in maintaining profitability due to potential increases in production costs.
In official trading, the Naira depreciated by 23.29%, closing at N1,099.05 to a dollar. While the parallel forex market witnessed a marginal depreciation of 0.59%, quoted at N1,180/$1, the concerns remain substantial.
The Central Bank of Nigeria has extended the timeline for issuing letters of credit from 24 hours to five working days, reflecting the ongoing struggle with foreign exchange scarcity.
This adjustment is part of the newly approved 2023 service charter, deviating from the previous 24-hour timeline.
Despite the CBN’s efforts to unify all segments of the forex market earlier in June 2023, the move seems to have triggered further instability.
The Naira lost nearly a fifth of its value, trading at N951.2/$ on the official forex window, impacting local and international trade.
Financial experts have called on the CBN to de-dollarize the economy, suggesting strategies such as declaring local transactions in US dollars illegal and promoting the sale of crude oil to local refineries in Naira.
Source: Nairametrics
