Naira depreciation made worse by Nigerian banks’ inability to meet dollar demand

LEGIT NG

The depreciation of the Naira witnessed in recent times was exacerbated by Nigerian banks’ inability to meet the surging demand for dollars, a report has highlighted. 

According to Nigeria’s macroeconomic and market report for August 2023 by Comercio Partners, the development is forcing buyers to turn to the parallel market. 

Legit.ng had earlier reported that the Naira has continued to plunge lower in the FX market. On Thursday, August 10, 2023, the naira fell to its lowest in history, exchanging at N930 to a dollar as demand for the dollar by importers and other users surged.

How Naira reacted in August

The report pointed out that the month of August started with a bang as the Naira reached a high of N789.08/$1 on August 1st, only to plummet to a low of N738.18/$1 by August 30th.

This marked a depreciation of roughly 0.76% from the July closing rate of N756.94/$1, eventually settling at N762.71/$1 by month-end.

It stated that the Naira faced a sharp decline, weakening to N930 to 1 dollar in the unofficial foreign exchange market, known as the parallel market, as the US dollar steadied near six-month highs.

Lingering concerns about inflation in the United States and the hawkish Federal Reserve did however contributed to the dollar’s strength, prompting investors to seek safe-haven currencies.