Again naira witnesses slight fall against dollar, trades at N765.13
The Nigerian Naira has on Thursday experienced a decline against the United States Dollar as the Naira exchanged at a rate of N765.13 per Dollar at the investors and exporters window.
This marked a depreciation of 0.26% compared to the previous day’s exchange rate of N763.17 per Dollar.
The total trade volume reached $204.84 million at the official investors and exporters window. Additionally, the indicative rate at the I&E window closed at N753.50 to the Dollar, while the lowest selling rate for the Naira was 446.32 to the Dollar during Thursday’s trading session.
Naira’s Depreciation Against the Dollar
The depreciation of the Naira against the US Dollar has become a recurring issue in Nigeria’s forex market.
The continuous decline in the value of the Naira has raised concerns among economists, policymakers, and the general public.
Analysts say the exchange rate plays a crucial role in the economic stability of a country, affecting imports, exports, and overall investment sentiment. The recent depreciation of the Naira indicates potential challenges and vulnerabilities within Nigeria’s economy.
Implications of Naira’s Depreciation
The depreciating Naira has several implications for the Nigerian economy an economist, Dr. Dele Fanwo said.
“First and foremost, it affects the purchasing power of individuals and businesses. As the value of the Naira decreases, imported goods become more expensive, leading to increased inflationary pressures.
“This, in turn, negatively impacts the cost of living for Nigerians, especially those with lower incomes. Additionally, businesses that rely on imported raw materials or finished products face higher production costs, reducing their competitiveness in both domestic and international markets.
“Furthermore, the depreciation of the Naira hampers foreign direct investment (FDI) inflows into the country. International investors may be deterred by the uncertainty surrounding the exchange rate and potential losses resulting from currency fluctuations.
“Consequently, the reduction in FDI limits job creation, technological advancements, and overall economic growth,” he said
Speaking on the reasons hehind naira’s depreciation, the economists said, “Several factors contribute to the depreciation of the Naira against major international currencies, particularly the US Dollar.
“One significant factor is Nigeria’s heavy dependence on oil exports. Oil revenue constitutes a significant portion of the country’s foreign exchange earnings. Hence, fluctuations in global oil prices directly impact the value of the Naira. In periods of declining oil prices, Nigeria’s revenue decreases, causing pressure on the Naira’s exchange rate.
“Furthermore, macroeconomic factors such as inflation, interest rates, and government policies play a crucial role in determining the value of a country’s currency.
“In Nigeria, high inflation rates, inconsistent monetary policies, and limited fiscal discipline have contributed to the Naira’s depreciation. These factors erode investor confidence and create a volatile economic environment, making the Naira less attractive to foreign investors.”
On the way to mitigate the challenge, Dr. Dele Fanwo said” To mitigate the continuous depreciation of the Naira, the Nigerian government and monetary authorities need to implement effective measures.
“One key strategy is to diversify the economy away from heavy reliance on oil exports. Promoting non-oil sectors such as agriculture, manufacturing, and services can generate alternative sources of foreign exchange and reduce the vulnerability to oil price fluctuations.
“Moreover, the Central Bank of Nigeria (CBN) plays a critical role in managing the exchange rate. By implementing appropriate monetary policies, the CBN can stabilize the Naira and restore investor confidence.
“This may include measures such as maintaining a reasonable interest rate regime, enhancing transparency in forex operations, and implementing sound fiscal policies to manage inflation effectively.
“Furthermore, improving the ease of doing business, strengthening infrastructure, and attracting foreign investments are vital for Nigeria’s economic growth. These efforts require a collaborative approach of all stakeholders.”