The naira continues its free fall on the official Investor and Exporter window of the foreign exchange market, closing at N1482.57/$ on Tuesday.
This is a 9.93 per cent decline from its N1348.63/$ Monday rate according to data from the FMDQ Securities Exchange.
On the parallel market, it remained stable at N1,450/$, and on the cryptocurrency peer-to-peer market, the naira was trading for N1,439.5/$ on Binance’s P2P platform as of the time of filing this report.
The naira has now fallen to a new all-time low on the official market and this can be linked to the technical devaluation of the national currency.
On Monday, FMDQ Securities Exchange, which calculates the exchange rate, revised the methodology used to set the rate. According to some experts, this is a technical devaluation of the national currency.
In a market notice, FMDQ stated, “This revision aims to address recent fluctuations and challenges encountered in the Nigerian Foreign Exchange (‘FX’) Market.”
It highlighted that its new measures will ensure that NAFEX and NAFEM rates accurately reflect market conditions. It explained, “These revisions are focused on enhancing the accuracy and reliability of the NAFEX and NAFEM rates determination process, with a focus on data availability and integrity involving a rigorous data validation process, including tolerance checks which shall be applied by FMDQ Exchange, subject to internal policies and procedures.”
Also on Monday, the Central Bank of Nigeria released a circular to authorised dealers on financial market price transparency. The bank said its attention had been drawn to the practice of some dealers and their customers in reporting inaccurate and misleading information on transitions in the financial market.
It stated that the behaviour is not compliant with ethical standards… “and deliberate attempts to create price distortions by reporting false transaction details amounts to market manipulation which will not be tolerated and henceforth face sanctions.”
This continued depreciation of the naira against the dollar is despite efforts by the Central Bank of Nigeria and the Federal Government to boost liquidity in the foreign exchange market.
The national currency is now close to trading at N1,500/$ as recently predicted by the Group Managing Director of Cowry Asset Management Limited, Johnson Chukwu.
In a recent The PUNCH report, he said, “The worst-case scenario is that the naira could worsen to N1,500 against the dollar.”
The fall of the naira is set to lead to further price hikes, the president of the Manufacturers Association of Nigeria, Francis Meshioye, recently noted to The PUNCH.
He said, “It is not possible to remain profitable with this exchange rate. The first challenge is breaking even. It means the prices of things will be higher, and the income is not there for people to buy things as they should buy as things become more expensive.”
However, the International Monetary Fund believes the naira has not discovered its fair value against the dollar yet.
Nigeria’s Country Representative, International Monetary Fund, Dr. Christian Ebeke, recently stated, “There is also uncertainty in the market. I am not sure that the parallel rate is the ultimate rate. At some point, we may think about a fair naira rate that is probably between what we see in the parallel market and the official market.
“But it is very difficult while you are still in the transition phase to talk about what is a fair value and what we are seeing.”