The Naira recently depreciated by 12% in just seven days, thus shedding all the gains it made against the U.S. dollar in early April. Local media reports attribute the volatile naira’s latest drop to the growing mismatch between the supply and demand of foreign exchange.
Nigerian Currency Reverses Early April Gains, Depreciating by 12% in Seven Days
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Demand and Supply Mismatch
Just weeks after nearly breaching the 1,000 mark, the volatile Nigerian currency experienced a sharp 12% slump in the last seven days. On April 26, it closed trading at just over NGN1,300 per dollar. Consequently, the Central Bank of Nigeria (CBN) adjusted the customs duty foreign exchange rate from NGN1,151.16 to NGN1,277.52.
Interestingly, this depreciation occurred shortly after the naira was hailed as the best-performing currency in April. As reported by Bitcoin.com News, the CBN’s policy changes as well as the Nigerian government’s crackdown on perceived currency saboteurs were thought to have helped the naira gain against the dollar. Crypto exchange Binance is one of the alleged currency manipulators or enablers that drew the ire of the Nigerian government.
However, some local media reports attributed the naira’s resurgence to CBN intervention in the foreign exchange market. Allegedly, this intervention utilized the country’s national foreign exchange reserves. The central bank, however, denies these claims.
Meanwhile, a report in a local publication suggested that the dwindling supply of U.S. dollars versus the rising demand for the same is one of the main reasons why the naira has shed the gains it made in the first weeks of April. Another report by the Daily Post similarly confirmed the naira’s depreciation by 12% in just seven days.
The report added that the CBN’s attempts to contain the naira’s fall by releasing more than $15 million to registered currency exchanges or bureaus de change at almost NGN 1000 per dollar did not yield the desired results.
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Do you believe the CBN’s latest intervention is enough to halt the naira’s depreciation? Let us know what you think in the comments section below.
