August 04, (THEWILL) – The Nigerian Foreign Exchange Market (NAFEM) recorded a total of $4.79 billion turnover in the month of July, according to data obtained from the FMDQ platform.
The figures tracked by THEWILL during the 25 trading days in July also showed that the highest daily turnover was recorded on July 11 with $348.82 million, while the lowest volume occurred on July 3, when the market closed at $114.91 million.
During the just ended month, the domestic currency depreciated by N104.45 or
6.87 percent, having closed at N1,608.73 to the dollar on July 31, against N1,504.30 to one dollar it had opened with on July 1.
The highest depreciation rate was recorded on July 30 when the naira slumped to N1,60.33 to the dollar, while it registered the strongest value on July 22 with N1,500.34 to the dollar.
On Friday, August 2, marking the last trading week in July, the Naira traded at N1,617.08 to the dollar – a depreciation of N47.08 or 3 percent compared to the higher value of N1,570.00 to the dollar it had traded on the previous day.
The market had recorded intra-day high of N1,635.00 and a low of N1,550.00 before reaching the equilibrium of N1,617.08.
The market turnover for the first trading day in August was $142.32 million but dropped by $10.77 million to $131.55 million or 7.5 percent on August 2, signaling the possible weakening of the domestic currency in the eighth month.
The parallel market traded average of N1610,00 to the dollar on Friday, August 2, signifying meeting the target of the Central Bank of Nigeria (CBN) to see a convergence of the parallel and official markets as the local currency “stabilizes” in the horizon of N1,500 to the dollar. This translates to a 222 percent depreciation of the naira compared to the N472 to the dollar it traded on June 13, 2023 before the floating of the domestic currency in line with President Tinubu “bold” reforms that saw the Nair tumble to N664.04 to the dollar on June 14, when the official devaluation of the currency occurred. This has become the Achilles’ heel of the troubled economy that is now consuming virtually every sector.
The ripple effect of this includes an alarmingly high rate of inflation that has brought untold hardship to the citizens with massive loss of jobs, sharp decline in standard of living and closure of businesses, especially the small and medium enterprises (SMEs).
The National Bureau of Statistics (NBS) reported Nigeria’s inflation rate at a 28 year high of 34.19 percent in June, with food inflation hitting 40.9 percent.
To tackle inflation, the Monetary Policy Committee (MPC) of CBN raised the benchmark interest rate by a massive 400bps to 22.75 percent in February 2024. The CBN said it took the drastic measures to tackle soaring inflation (at 29.9 per cent in January) and to stem the collapse in the value of the naira. The apex bank raised the benchmark interest rate again in March, this time by 200bsp to 24.75 percent (as inflation jumped to 33.20 percent) and further jacked up the rate in May (as inflation hit a 28-year high of 33.69 per cent in April). The CBN continued to raise the monetary policy rate hitting 26.25 percent last July in its inflation-targeting policy.
This has untoward effects on the manufacturing sector, bearing the brunt of the “bold” reforms. The umbrella body of major manufacturers in Nigeria, the Manufacturers Association of Nigeria (MAN) recently declared that 767 manufacturing companies shut down while 335 others became distressed in 2023 as CBN’s tight monetary policy bites harder.
The manufacturers lamented that the continuous adoption of tight monetary policy is worsening the already bad situation of the real sector, and called for a robust synergy between the monetary and fiscal authorities. While this is being addressed, more companies are reporting losses in their half-year results as weak consumer demand.
