Despite Central Bank efforts, currency plunges below parallel market rates
In a disconcerting turn of events, Nigeria’s naira has plummeted to a new record low during intraday trading on Thursday, as reported by FMDQ Exchange data. This decline occurred despite the central bank’s vigorous efforts to stabilize the currency by selling dollars and infusing liquidity into the market.
The naira’s value sank as low as 1,851 against the dollar on the official market, a stark contrast to the approximately 1,800 rates observed in street trading. However, it managed to regain some ground, closing around 1,571 to the dollar, according to FMDQ data.
Africa’s largest economy grapples with severe foreign-currency shortages, which have relentlessly driven the naira to repeated all-time lows on both the official and parallel markets. Despite the central bank’s interventions through dollar sales, the currency continues to struggle.
A seasoned trader revealed that the central bank executed $100 million in interventions this week alone, bringing the total interventions since the previous week’s commencement to a staggering $300 million. The situation remains precarious, and market watchers are closely monitoring the naira’s trajectory.
Next week, the central bank is poised to convene its first interest rate meeting under the leadership of Governor Olayemi Cardoso. Governor Cardoso has pledged unwavering support for the naira and aims to combat soaring inflation, which currently stands at its highest level since the mid-1990s.
