Naira Weakens Against US Dollar as CBN Pursues President Bola Tinubu’s Exchange Rate Goals | Latest Data Reveals 2% Depreciation on Official Market
As the nation grapples with economic complexities, the Nigerian Naira continues its downward spiral against the US Dollar.
With a recent depreciation of 2% on the official market, the Naira’s weak stance mirrors a similar trend in the unofficial foreign exchange market.
Behind the scenes, however, there’s a determined force working to close the exchange rate gap between these two markets – President Bola Tinubu.
Understanding The Current Scenario
On June 7, 2023, the Central Bank of Nigeria (CBN) authorized a 2% depreciation of the Naira against the US Dollar.
This marks a critical move by President Bola Tinubu to unify the country’s disparate exchange rates.
Traders exchanged the Naira at a weaker rate of 476 Naira per dollar, an all-time low in the official market.
A Closer Look at the Exchange Rate
That day, investors and exporters parted with N470,000 to purchase $1,000.
The market, however, showed resilience as it closed. Data from FMDQ securities exhibited a recovery of the Naira to N464.67 per dollar.
Such fluctuations demonstrate Nigeria’s struggle with unifying its multi-tiered exchange rate system, a challenge President Tinubu is firmly committed to overcoming.
CBN’s Strategy to Stabilize the Naira
Avoiding a large-scale devaluation, the CBN has been steadily adjusting the Naira on the official market.
When the bank sold dollars at 645 Naira during its Friday auction, speculations of an imminent devaluation, bringing the official exchange rate closer to the auction level, ran rampant.
However, the CBN promptly dispelled these rumors, denying any such massive devaluation.
The Unofficial Market’s Stand
Despite the fluctuations on the official front, conditions remained stable within both the black market and the Peer-to-Peer (P2P) segments of the unofficial foreign exchange (forex) market.
Here, the Naira depreciated by N2 against the Dollar, moving the selling rate to N752/$1 from N750/$1.
Similarly, in the P2P forex window, the Naira declined by N5 against the Dollar, settling at N770/$1 compared to the previous N775/$1.
Naira’s Performance Under Previous Administration
Contrasting the current scenario is the considerable decline in the Naira’s exchange rate against the US Dollar during President Muhammadu Buhari’s eight-year tenure.
The Naira weakened by a staggering 57.26% and 37.58% in the official and black markets, respectively.
When President Buhari took office in 2015, the Naira exchanged at N197/$ on the official market.
The Central Bank of Nigeria and President Bola Tinubu continue their stride to combat the economic complexities facing the nation.
As they navigate this intricate landscape, their actions will likely shape the future trajectory of the Naira against the US Dollar.
While the road ahead remains uncertain, the determination to unify the country’s exchange rate and bring stability remains unwavering.
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FAQs
Why is the Naira weakening against the US Dollar?
Economic complexities and market dynamics have led to the weakening of the Naira against the US Dollar.
What is President Bola Tinubu’s plan to address this?
President Bola Tinubu aims to unify the country’s exchange rates and stabilize the Naira.
What is the role of the Central Bank of Nigeria in this situation?
The CBN is gradually adjusting the Naira on the official market to avoid a large-scale devaluation.
How did the Naira perform during President Muhammadu Buhari’s tenure?
The Naira weakened significantly during President Buhari’s tenure, depreciating by 57.26% and 37.58% in the official and black markets, respectively.
What are the current selling rates for the Naira in the black market and the P2P forex window?
The Naira is currently trading at N752/$1 in the black market and N770/$1 in the P2P forex window.