The naira displayed mixed signals against the dollar in Nigerian forex markets on Thursday as the dollar, having recently hit seven-month lows, saw a rebound due to bargain hunting.
The naira gained approximately N50, closing at N1,543/$1 on Wednesday, up from N1,592/$1 the previous day, according to data from the NAFEM market.
However, in the black market, the naira fell below the N1,600/$ support line, trading at N1,610/$1 by late Wednesday, compared to N1,605/$1 on Tuesday.
Despite some improvement in macroeconomic conditions, the local currency struggles to maintain the critical N1,500 support level and is facing significant pressure.
Market fundamentals suggest that if the naira cannot sustain its current levels, it could approach N1,800/$1. Even advocates of free market principles may doubt the naira’s ability to recover to its March highs this quarter.
The International Monetary Fund (IMF) projects a 35 percent depreciation, with a final rate of N2,081/$.
The FDC is more optimistic, predicting stabilization at N1,580/$1, while the Economist Intelligence Unit (EIU) estimates N2,000/$. The Federal Government’s 2024 budget assumes an exchange rate of N800/$1.
The Central Bank of Nigeria (CBN) has recently attempted to support the naira by providing record amounts of forex directly to companies. Despite a significant $815 million intervention on August 6, the naira’s performance has remained largely unchanged.
The rapid increase in the parallel market rate has raised concerns about its impact on the cost of imported goods, though petrol appears to be supported by NNPCL.
Forex traders blame the CBN’s erratic dollar sales for the ongoing pressure on the naira.
Bureau De Change (BDC) operators have criticized the CBN for irregular dollar sales, which they believe undermine confidence in the currency market and exacerbate parallel market pressure.