This recent weakening of the local currency occurred despite a slight increase in Nigeria's external reserves and ongoing efforts by the CBN to stabilize the exchange rate through consistent interventions in the market.
Intraday trading on the official window revealed significant volatility, with the Naira fluctuating between a high of N1,615/$1 and a low of N1,605.01/$1 on Wednesday. This wider daily trading range contrasts with the more constrained movement observed on Tuesday, which saw a high of N1,609.5/$1 and a low of N1,603/$1.
Market analysts attribute this increased volatility and the continued depreciation to persistent liquidity constraints within the official market and delays in anticipated foreign exchange inflows. These factors appear to be exerting pressure on the Naira despite the CBN's repeated assurances of sustained interventions aimed at bolstering the currency's stability.
Meanwhile, the parallel market witnessed a slight weakening of the Naira, with the exchange rate settling at N1,625/$1 on Wednesday. This marks a depreciation from the N1,615/$1 recorded on Tuesday. Notably, the parallel market rate stood at N1,605/$1 on Monday, indicating a N10 daily loss between Monday and Tuesday.
A key development raising concerns among financial observers is the shrinking differential between the official and parallel market exchange rates. Currently hovering around N13, this narrowing gap is fueling anxieties about a potential resurgence of speculative demand for foreign exchange and persistent difficulties faced by businesses and individuals in accessing FX through official channels.
Analysts suggest that this convergence could indicate underlying pressures within the broader foreign exchange market, potentially undermining the CBN's efforts to maintain stability and channel transactions through the official window. The implications of this narrowing gap warrant close monitoring as it could signal renewed instability in the foreign exchange landscape.