Naira Slumps to 1,563.8 Per Dollar on FMDQ, Prolonging Downward Trend

Nigeria’s naira extended its losing streak to a fourth day, slipping to the weakest level since March despite central bank intervention amid seasonal demand for dollars and continuing investor skepticism.

The naira stood at 1,563.8 per dollar at its official close on Friday, according to FMDQ. That’s the weakest since March 18, down from 1,554.65 the day before and shrugging off dollar sales totaling $122.7 million on July 10-11 to local currency dealers by the Central Bank of Nigeria.

Analysts said the amounts were insufficient to balance domestic demand for the greenback.

“The CBN has been in the market selling $50 million from time to time, which is not enough,” said Carlo Morelli, senior portfolio manager at Azimut Investment SA, who blamed the thin domestic market on capital outflows and a lack of investor confidence in the currency, while giving the central bank credit for tightening monetary policy and tackling access naira liquidity.

The CBN has raised interest rates aggressively to confront sky-high inflation and stabilize the naira, which has weakened about 70% against the dollar since exchange-rate controls were eased last year.

Since the beginning of the year, the naira has been the second-worst performing currency in the world tracked by Bloomberg after the Lebanese pound.

The central bank, which has increased its benchmark borrowing rate by 14.75 percentage since May 2022 to 26.25%, delivers its next policy decision on July 23. Data released on Monday showing inflation advanced to 34.2% on an annual basis in June will likely keep the prospect of another rate hike on the table.

It’s in a better position to support the currency after the nation’s foreign exchange reserves reached $35 billion on July 8, the highest since May 30, 2023, according to data.