Naira Achieves New Milestone in Exchange Rate, Narrows Difference with Black Market, Amidst World Bank’s Forecast

On Thursday, December 28, 2023, the Nigerian currency, the naira, recorded a historic depreciation in the official market, reaching an all-time low of N1,043.09 against the US dollar. This significant drop reflects a 16.35% decline from its previous closing rate and occurs just days before the end of the year.

The naira’s volatility has been particularly notable in 2023, marking it as one of the most fluctuating currencies globally. This instability follows the Nigerian government’s introduction of new foreign exchange reforms in June 2023. The current exchange rate represents the second instance this year when the naira has breached the N1,000 per dollar threshold in the official market. Previously, on December 8, 2023, the naira had plummeted to N1,099.04 per dollar, setting a record low in the official market.

In contrast, the parallel (or black) market saw a marginal appreciation of the naira, which closed at N1,220, showing signs of nearing parity with the official rate. According to black market traders, the demand for the US dollar has lessened following the Christmas and New Year festivities. Aliyu Umar, a trader in Lagos’s Ogba area, indicated to Legit.ng that the current easing of pressure on the dollar is due to reduced demand during the holiday season. Umar anticipates an increase in demand in January as normal activities resume.

The recent depreciation of the naira, as recorded on December 28, signifies a substantial loss of about N170.5 or a 16.35% decrease compared to its closing value of N872.59 on December 27, 2023. Intraday trading data from the Nigerian Autonomous Foreign Exchange Market (NAFEM) revealed a high of N1,235.65 and a low of N720 per dollar. Moreover, forex turnover at NAFEM was reported at $83.63 million, a notable 34.63% reduction from the previous day’s figures.

In a broader context, the World Bank’s latest Migration and Development Brief, released in December, forecasts that Diaspora remittances to Nigeria are set to exceed $20 billion by the end of 2023. This increase is part of a wider trend of growing remittances into sub-Saharan Africa, projected to rise by 1.9%. However, the World Bank also noted that remittances to the region are increasingly being channeled through unofficial means due to fixed exchange rates and capital controls. This shift reflects the ongoing challenges in the global remittance landscape, which is expected to continue growing in 2023, albeit at a slower pace.