Official Rate Matches Unofficial Market Rate
The Nigerian currency, the naira, recently hit a record low of 1,248 naira for every US dollar, before recovering to 845 naira per greenback. This fall in value closely parallels the rates offered on the unofficial foreign exchange market.
Abandoning the Fixed Exchange Rate Regime
When Nigerian President Bola Ahmed Tinubu took office, the Central Bank of Nigeria (CBN) abandoned the fixed exchange rate regime. As a result, the naira-to-dollar exchange rate initially dropped by 30%. The CBN then allowed the naira to freely float, causing further depreciation.
Continued Depreciation and Foreign Exchange Shortage
Despite these changes, the local currency continues to lose value against the US dollar on the unofficial market. By December 20th, one dollar could buy 1,228 naira. Experts attribute this depreciation to Nigeria’s inability to generate enough foreign exchange.
Predictions for the Naira in 2024
During his appearance before the Nigerian Senate and House of Representatives Joint Committee, CBN Governor Olayemi Cardoso predicted a brighter future for the naira in 2024. He expects the domestic economy to maintain a positive trajectory, with inflation and exchange rate pressures declining. Cardoso anticipates that the foreign exchange market will function smoothly, leading to a stabilization of the naira’s value.
Hot Take: Naira’s Future Looks Promising
The Nigerian currency, the naira, experienced a significant drop in value, reaching a record low against the US dollar. Despite the challenges, the Central Bank of Nigeria believes that the foreign exchange market will stabilize in 2024, leading to a positive outlook for the naira’s future. As Nigeria aims to generate more foreign exchange and improve its economic stability, it will be interesting to see how the naira fares in the coming years.
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