Naira Depreciates Across Forex Markets Amid Low Liquidity

Nigeria's domestic currency depreciated in value across forex markets at the close of Wednesday's trading.

The naira declined against the US dollar on Wednesday to close at N411.5 to a dollar compared to N410.83/$1 rate recorded on Tuesday.

The exchange rate also depreciated against the US dollar at the parallel market to close at N503/$1 compared to N502/$1 recorded on Tuesday. The drop in the value of the naira may be attributed to the activities of speculators and lower liquidity at the forex market.

Also, forex turnover at the Investors and Exporters (I&E) window slumped by 25.7% on Wednesday from Tuesday's $215.53 million to $160.12 million.

Nigeria’s external reserve dipped by $46.3 million on Tuesday, 29th June 2021 to stand at $33.37 billion. This represents a 0.14% decline compared to the $33.42 billion recorded the previous day.

Nigeria’s foreign reserve fell to its lowest position since October 2017, as its year-to-date decline surpasses $2 billion, while its month-to-date decline stands at $858.53 million. This is despite the recent bullish trend recorded in the global oil market.

The decline may be attributed to reduced forex earnings, especially from crude oil export due to the cut in production quota, as well as the widening international trade deficit.

The CBN, which operates a managed float foreign exchange system, also periodically supports the currency using the external reserves, and a lower reserve is expected to affect the currency.