The Nigerian naira reached a historic low of 1,681 per dollar this week, slipping by 0.6% in the face of continued central bank intervention and record-high fixed-income yields.
According to data from FMDQ, the naira has depreciated 72% since the central bank reforms in June 2023, which permitted the currency to trade more freely.
The depreciation highlights ongoing challenges within Nigeria’s financial market despite attempts to stabilize the currency's value through policy measures.
“Portfolio inflows seem to have faded over the past two weeks,” while central bank intervention to boost dollar supply remained “moderate,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc. “Dollar demand tends to pick up periodically.”
The Central Bank of Nigeria sold 1.4 trillion naira ($835 million) of one-year OMO bills at 24.28% on Monday after offering the security at a record 24.32% earlier this month, in a bid to attract dollar inflows. That failed to boost liquidity as spot turnover in the currency market dropped 10% to $196.8 million on Wednesday from the previous day, according to FMDQ. That’s well below the one-month average of $226.3 million.
With the inflation rate at 32.7% in September, real interest rates remain deeply negative, adding to investor concerns about committing money to soft-currency assets amid a sluggish economy. Central bank governor Olayemi Cardoso said in September he’s aiming for positive interest rates, as he unexpectedly lifted the benchmark rate by half a percentage point to 27.25%.