Naira Falls to N1035/$ on I&E Window, Marks Third Closure Above N1,000/$ in 2024

The Nigerian naira closed trading at N1035.12/$ on the official Investor and Exporter (I&E) foreign exchange window, marking a 4.72% decline from the N988.46/$ it closed at on the previous day. This is the third time in 2024 that the naira has closed above N1,000/$ on the I&E window since the removal of the Central Bank of Nigeria's rate cap.

The naira's challenging start to the year follows a declining trend, recording a decrease in the first two trading days of 2024. The currency began trading at N932.67/$ on Wednesday, reaching an intraday high of N1,224/$ and a low of N700/$ before settling at N1035.12/$. The total forex turnover for the day stood at $85.68 million.

Despite the Federal Government's recent receipt of a $2.25 billion foreign exchange support facility from the African Import-Export Bank, aimed at addressing FX shortages, the naira's performance remains under pressure. The facility is part of a $3.3 billion loan secured by the Nigerian National Petroleum Company Limited in August 2023.

The World Bank's December Nigeria Development Update highlighted the naira's depreciation by 41% in the official market and 30% in the parallel market against the US dollar in 2023. The report emphasized the need for increased FX supply and clarity on the Central Bank's reserve position to boost market confidence.

As the naira grapples with challenges, analysts suggest that a combination of monetary policy tightening and increased FX supply, especially through all exports via the NAFEM, could contribute to stability in the official market. However, the World Bank stressed the importance of addressing the FX backlog to enhance market confidence.