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Cryptocurrency News Articles
Nigerian Naira Plummets to Historic Low, Sparking Market Turmoil
Apr 24, 2024 at 11:22 am
The Naira experienced a significant depreciation against the US Dollar on Tuesday in the Nigerian Autonomous Foreign Exchange Market (NAFEM), prompting concerns about a return to previous unfavorable conditions. The Nigerian currency lost 5.3% against the greenback, closing at N1,300.15/$1, amid increased forex transactions. Additionally, the Naira weakened against the Pound Sterling and the Euro in the spot market, while the parallel market also witnessed a further decline, closing at N1,275/$1, raising fears of further monetary instability in Nigeria.
Nigerian Naira Plummets to Lowest Level in History, Sparking Market Turmoil and Economic Concerns
The Nigerian Naira has plunged to an unprecedented low against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX), raising grave concerns that the country is facing a full-blown currency crisis. On Tuesday, April 23, the Naira lost a staggering 5.3 percent or N65.66 against the greenback, closing at N1,300.15/$1 compared with the previous day's value of N1,234.49/$1. This precipitous decline marks the Naira's weakest level against the Dollar in its history.
Forex traders witnessed a surge in transaction volumes during the trading session, with the turnover increasing by $23.48 million or 21.3 percent to $133.65 million from the $110.17 million recorded on the preceding day. This surge in activity suggests that market participants are rushing to convert their Naira holdings into foreign currencies, exacerbating the currency's devaluation.
The Naira's woes extended beyond the Dollar, with the local currency also depreciating against the Pound Sterling and the Euro in the spot market. The Naira lost N111.01 against the Pound Sterling, selling at N1,542.32/£1 compared to the previous session's N1,431.31/£1. Against the Euro, it depleted by N104.23, quoting at N1,332.35/€1 versus Monday's rate of N1,228.09/€1.
In an effort to stabilize the foreign exchange market, the Central Bank of Nigeria (CBN) has issued a new circular to all Bureau De Change (BDC) operators, announcing a fresh sale of forex at a reduced rate of N1,021 per Dollar. This initiative represents the second time this month (at N1,1100/$1) and the fourth instance this year that the CBN has intervened in the market through forex sales. These interventions underscore the CBN's proactive strategy in managing currency volatility and ensuring the availability of foreign exchange.
However, the Naira's value in the parallel market did not fare any better, weakening further by N25 on Tuesday to close at N1,275/$1, in contrast to the previous day's value of N1,250/$1. This widening gap between the official and parallel market rates indicates a lack of confidence in the Naira's official valuation.
The cryptocurrency market also recorded losses, with Cardano (ADA) losing 3.5 percent to trade at $0.5033, Ripple (XRP) shedding 1.9 percent to settle at $0.5496, Litecoin (LTC) going down by 0.9 percent to $85.18, Dogecoin (DOGE) slumping 0.5 percent to sell at $0.1607, and Bitcoin (BTC) depreciating by 0.3 percent to trade at $66,445.00.
In contrast, Binance Coin (BNB) gained 1.4 percent to close at $608.81, Ethereum (ETH) appreciated by 0.4 percent to sell at $3,218.06, and Solana (SOL) increased by 0.2 percent to $156.69. The US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 apiece.
The Naira's precipitous devaluation has sent shockwaves through the Nigerian economy, raising fears of rising inflation, increased import costs, and a decline in foreign investment. Importers will face higher costs for foreign goods, which could lead to increased prices for consumers and businesses. Additionally, the weakened Naira could make it more difficult for Nigeria to service its foreign debt obligations.
The CBN has expressed concern over the Naira's depreciation, attributing it to increased demand for foreign currencies amidst a decline in foreign exchange inflows. The bank has assured the public that it is monitoring the situation closely and will take appropriate measures to stabilize the currency.
However, analysts are skeptical about the effectiveness of the CBN's interventions in the long term, arguing that structural reforms are needed to address the underlying causes of the Naira's weakness. These reforms include diversifying the economy away from oil dependence, increasing non-oil exports, and improving the business environment to attract foreign direct investment.
The Nigerian government is facing mounting pressure to act swiftly to address the Naira's crisis and prevent its further deterioration. The country's economic recovery from the COVID-19 pandemic is at stake, and the government must take decisive action to stabilize the currency and restore investor confidence.
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