THE naira depreciated against the dollar in the just concluded week despite the Central Bank of Nigeria’s (CBN) $122.67 million foreign exchange (FX) sales to authorised dealers.
At the official Nigerian Autonomous Foreign Exchange Market (NAFEM) on Friday, July 12, the naira fell to N1,563.80 to the dollar, compared to N1,509.67 per dollar on Monday, July 8.
In the parallel market, the naira also fell to N1,540 on Friday from N1,523 to the dollar on Monday.
Last week’s performance of the Nigerian currency against the dollar reflects the weakness in the value of the naira in recent times, traceable to FX volatility in the Nigerian currency market.
Although the sale of the $122.67 million to authorised dealers led to a surge in FX turnover in the week, it could not relieve the naira depreciation against the dollar.
In a statement on Friday, July 12 by its Director of Financial Markets, Omolara Duke, the apex bank disclosed that it sold $122.67 million FX to authorised dealers.
According to the CBN, it sold $67.5 million to 27 authorised dealers while purchasing $2.5 million from one authorised dealer on Wednesday, July 10.v
He realed that the bid range for the transactions was between N1,480/$1 and N1,500/$1.
He said on Thursday, July 11, it sold $55.17 million to 19 authorised dealers at a rate of N1,540.0/$1, stating that the payments for these spot sales are due on July 15, 2024.
“All authorised dealers are to ensure that foreign exchange purchases from the Bank are used exclusively for trade-backed transactions, which should be reported within 72 hours,” the apex bank added.
According to the Chief Economist at Vetiva Capital Management Limited, Ibukun Omoyeni, the naira will begin to shed some gains with the coming up of the CBN by-monthly Monetary Policy Committee (MPC) this month.
While on Channels TV on Saturday, July 13, he noted this to be the practice, given the fact that the MPC has its stands against FX pressure.
“The exchange rate factor is that we don’t look at weekly or monthly forecast, we look at quarterly or yearly forecast because a lot of factors can cause the naira to depreciate today in the short term and appreciate today in the medium term,” he said.
Between January and February this year, the naira traded around N1,800 to the dollar.
Omoyeni added, “The fact that we are at N1,500 shows that there are some improvements.”
The ICIR reports that Naira depreciation remains one of the economic headwinds causing food inflation and soaring commodities prices in the country.
In the last year, basic staples like rice, beans, and vegetables have become increasingly unaffordable for the average Nigerian, stretching household budgets to their limits.
The monthly inflation data of the National Bureau of Statistics (NBS) show food index constitutes over 51 per cent of the inflation basket which could be attributed to rising prices in fundamental food commodities, including bread, cereals, oil, and fat.
According to analysts at Cowry Asset Management, 43 food items surveyed reported price increases on a year-on-year and month-on-month basis between April and May 2024.
“An unweighted simple average, which does not account for consumption trends, shows that the average price of food items in the Bureau’s designated basket increased by 137.3% year-on-year and 13.4% month-on-month,” the analysts stated in weekly financial markets review.