Nigeria’s naira plunges 31% in second devaluation within months

BREAKING NEWSJanuary 30, 2024 at 7:45 PM UTC

TLDR

Nigerian naira experiences historic decline against the US dollar, marking second devaluation in seven months.
Currency depreciates by 31%, reaching a record 1,413 naira per dollar on Monday.
Central Bank of Nigeria adjusts exchange rate methodology to combat alleged rate manipulation by traders.

The Nigerian naira experienced a historic decline against the US dollar, marking the second devaluation in seven months. This was prompted by a revision in the methodology used to determine the exchange rate.

The local currency depreciated by 31%, reaching a record 1,413 naira per dollar on Monday, as reported by FMDQ, the entity responsible for calculating the exchange rate for Nigeria. The adjustment occurred within the framework of the NAFEX fixing, the official foreign exchange window.

The Central Bank of Nigeria took this step after alleging that traders had been manipulating the exchange rate through the under-reporting of transaction rates.

Key Takeaways

Despite assurances from the Central Bank of Nigeria (CBN) regarding the clearance of a backlog of foreign currency demands, Africa's largest economy faces a significant concern with approximately $7 billion in matured forex forwards. This situation continues to exert pressure on the Nigerian naira due to persistent foreign currency shortages. In an attempt to address this issue, the CBN has injected $500 million, as disclosed in a statement on Monday. Earlier in the month, the central bank had already paid around $2 billion from the backlog, spanning various sectors including manufacturing, aviation, and petroleum, according to CBN spokesperson Hakama Sidi Ali.

Nigeria

Naira

FMDQ

NAFEX

Forex

CBN