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The Nigerian naira fell further against the US dollar in the autonomous foreign exchange (FX) market, reaching approximately N1,690 per dollar on Tuesday. The depreciation follows a decline in FX liquidity, as the Central Bank of Nigeria (CBN) has reduced its dollar interventions.
In October, the CBN’s FX sales to banks declined by 30% to $383 million, according to MarketForces Africa. This reduction in dollar supply has left a gap in the FX market, leading to increased pressure on the naira. The reduced interventions are seen by some analysts as a step toward a fully market-driven “willing buyer, willing seller” FX model, which could lead to further naira depreciation if demand for dollars continues to outpace supply.
At the last Dutch auction in August 2024, demand for dollars remained high, with bids totaling $1.1 billion from FX users through authorized dealer banks. However, the CBN appears to have scaled back on these auctions due to the overwhelming demand, opting instead for limited interventions. On Tuesday, data from the FMDQ platform showed the naira slipped by 0.15%, closing at N1,689.88 per dollar.
The demand for dollars remains high across Nigeria’s FX markets, largely due to the country’s dependence on imports. In the parallel market, the naira closed at approximately ₦1,725 per dollar, a gain of N5 compared to the previous day.
Meanwhile, oil prices saw an uptick on Tuesday, with Brent Crude rising by 0.86% to $72.44 per barrel, and West Texas Intermediate (WTI) increasing by 1.01% to $68.70 per barrel. The higher oil prices may have limited impact on immediate FX supply but highlight broader market shifts that could affect Nigeria’s export revenues and long-term currency stability.
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