Naira plunges 31%, brings currency closer to Nigeria street rate

Nigeria’s naira plunged to a record against the dollar following a revision of the methodology used to set the exchange rate, in effect the second devaluation of the currency in seven months.

The local unit depreciated 31% to 1 413 naira a dollar on Monday in the so-called NAFEX fixing, the official foreign exchange window, according to data published by FMDQ, which calculates the exchange rate for the West African nation.

That brings the naira closer to its parallel-market rate of around 1 450, and follows a devaluation of almost 30% in June as the Central Bank of Nigeria liberalised the currency regime in an attempt to attract inflows and improve liquidity.

Africa’s biggest oil producer has battled volatility in the exchange rate since the foreign currency reforms in June. The central bank has blamed inadequate dollar liquidity for exacerbating the volatility and promised to boost supply to clear a backlog of foreign-exchange demand.

The change in pricing methodology was aimed at addressing “recent fluctuations in the FX market and to ensure that rates accurately reflect market conditions while upholding price formation and transparency,” economists at Rand Merchant Bank said in a client note, citing FMDQ. “The CBN has been reiterating its commitment to settling all legitimate foreign exchange backlogs in a short time frame and is implementing a strategy to improve liquidity in the FX market.”

A central bank spokesman did not immediately respond to requests for comment.

© 2024 Bloomberg