Nigeria’s Naira Plunges to Record Low Against the Dollar Amid Currency Devaluation

The value of the Nigerian naira has experienced a significant drop, reaching an all-time low in the country’s financial history. The exchange rate has fallen to around N1,415 per dollar in the black market, while the official rates are at N892 and N910. This steep decline has had a detrimental impact on the lives of Nigerians and has created confusion for businesses, leaving many unsure if they will be able to survive in this high-priced dollar environment.

Since the handover of power in May 2023, the naira has faced numerous challenges. In June 2023, the Central Bank of Nigeria (CBN) implemented a policy to unify the naira, relinquishing the top bank’s control over the foreign exchange market. However, this policy has faced major obstacles due to the lack of necessary resources in the economy to support its implementation.

Victor Aluyi, a renowned Nigeria investment analyst, highlights that the current fall of the naira does not reflect its true value. According to Aluyi, the main issue causing the high price of the dollar is the challenge faced by the government’s unification of the naira policy since the economy lacks the required amount of dollars. Nigeria heavily relies on imports and has a high demand for dollars, but its level of exports does not suffice to meet this demand.

The unification of the naira policy has been running for the past six months, creating various challenges. Firstly, the lack of trust in this policy has contributed to more people purchasing dollars, speculating on making profits. Secondly, the scarcity of dollars has intensified, exposing the vulnerability of the policy. The CBN has not provided relevant information about the ongoing situation, further fueling speculators to take advantage.

The recent adjustment made by the CBN to lower the price of the dollar on January 23 has also weakened the naira further. Kyle Chapman, a forex analyst, states that the continuous fall of the naira discourages investors from entering Nigeria. Aluyi believes that a change in the naira’s current trajectory is imminent. The government must increase the supply of dollars through strategies such as boosting crude oil production and increasing interest rates to attract foreign investors.

The official exchange rate is currently at N892 per dollar, while the black market rate is approximately N1,415.