Naira Hits Lowest Level Since March Amid Persistent Decline

Nigeria’s Naira Hits Weakest Level Since March Amid Central Bank’s Struggles
Lagos, Nigeria – The Nigerian naira continued its downward trend for the fourth consecutive day, closing at 1,563.8 per dollar on Friday, its weakest level since March 18, despite central bank interventions. Seasonal demand for dollars and investor skepticism are key contributors to the currency’s decline.
The Central Bank of Nigeria (CBN) attempted to stabilize the naira with dollar sales totaling $122.7 million on July 10-11, but these efforts were insufficient to meet the high domestic demand. Analysts, like Carlo Morelli from Azimut Investment SA, cited capital outflows and a lack of investor confidence as contributing factors to the naira’s depreciation.
Despite aggressive monetary policy moves, including raising interest rates by 14.75 percentage points since May 2022 to combat inflation and stabilize the naira, the currency has weakened by about 70% against the dollar since exchange-rate controls were eased last year. Inflation reached 34.2% in June, suggesting another rate hike may be imminent.
Nigeria’s foreign exchange reserves reached $35 billion recently, bolstered by loans from the World Bank and the African Export-Import Bank. However, ongoing corporate demand and preparations for foreign vacations continue to pressure the naira. Analysts suggest that boosting FX supply through potential eurobond or local dollar bond sales later this year could help alleviate this pressure.
Central Bank Governor Olayemi Cardoso remains optimistic, noting that the worst of the naira’s volatility may be over, supported by an improvement in crude oil production and increased capital inflows. Nigeria’s crude output rose to 1.5 million barrels per day in June, the highest since February, which could further support the naira.
For the naira to stabilize and regain value, large portfolio and capital inflows are necessary, according to experts like Samir Gadio from Standard Chartered Plc. Nigeria, Africa’s largest crude producer, relies heavily on oil sales and capital inflows, which tripled in the first quarter of the year to $3.4 billion, driven by higher central bank interest rates.