Naira Plummets to All-Time Low as Dollar Demand Surges

The Nigerian naira reached an unprecedented low, plummeting to over N930/$1 at the parallel market on Thursday, August 10, 2023. This alarming slide in value has been attributed to an overwhelming surge in demand for dollars by importers and other end-users, far surpassing the available supply.

In Lagos, currency traders around the Ikeja axis said the dollar was exchanged at N935.00 per dollar, while dealers in Abuja said it was traded at N950.00 per $1 on Thursday as against N915 and N920.00 it was traded in the previous session on Wednesday.

Similarly, currency traders in Uyo said the dollar was exchanged at N 938.00 and N940.00 per dollar on Thursday, amidst a significant surge in demand.

However, the local currency gained slightly against the dollars on the Investors and Exporters (I&E) window on Thursday, according to market records published on the FMDQ website.

Reacting to this, Razaq Fatai, an Abuja-based Economist, said the main catalyst behind the decline in the currency’s value is shortage of dollars amid soaring demand.

Historically, he said, Nigeria’s foreign exchange has been predominantly sourced from three channels which include crude oil exports, remittances and investment inflows. He argued that, unfortunately, all three channels, especially crude oil exports, have proven inadequate in meeting the escalating demands.

“Notably, the average crude oil production for the first half of this year, around 1.2 million barrels per day (mbpd), stands significantly below our historical average of 2.2 mbpd and the OPEC quota of 1.74 mbpd,” he said.

Mr Fatai said dwindling confidence in the domestic currency has led Nigerians to take an unfavourable position on the Naira, leading them to prefer holding their savings in dollars.

To counter this trajectory and ensure exchange rate stability, Mr Fatai said a fundamental shift hinges on augmenting exports, particularly by elevating oil production and facilitating non-oil exports.

“Addressing the issue of oil theft is crucial in raising oil production levels. Concurrently, removing non-tariff barriers in the trade of non-oil commodities is key,” he said.

Meanwhile, at the official window, market data posted on Thursday showed that the Naira closed at N 781.34 as against N782.38 per $1 recorded on Wednesday.

Thursday’s rate implies a 0.13 per cent appreciation from N782.38 per $1 recorded in the previous session on Wednesday.

August 11, 2023