Fluctuations in the naira exchange rate have recently caught the attention of market watchers, particularly in the parallel sector. During the third quarter of 2024, the naira has seen significant fluctuations in value, raising concerns about the potential economic impact of this trend.
According to recent data from Fatshimetrie, a key market indicator, the parallel exchange rate has moved to N1,705 per US$1, registering a sharp decline from the previous week. This downward trend appears to be more sustained, as opposed to the narrow daily fluctuations observed in recent weeks.
Parallel market participants have reported supply shortages in the past two weeks, which has likely contributed to the depreciation of the currency. This situation has also impacted the official segment of the foreign exchange market, with a slight depreciation noted in the NAFEM exchange index.
Although the naira closed last year in parallel at N1,215 to the dollar, marking a significant improvement from the previous quarter, the trend reversed during the second quarter of this year. After relatively stable in recent months, the naira appears to be facing downward pressure again.
Economic observers have been pessimistic about future price developments, attributing much of the trend to the continued depreciation of the naira against the dollar in the parallel market. This is expected to translate into higher prices for imported goods, directly impacting consumers in the market.
The volume of dollars traded in NAFEM has seen a significant year-on-year increase in the first nine months of 2024. This growth underscores the need for market participants to closely monitor exchange rate developments and adapt their strategies accordingly to mitigate potential risks.
In conclusion, the recent depreciation of the naira in the parallel market raises concerns about the economic stability of the country. The authorities and market players must collaborate to find sustainable solutions to limit the negative impact of these fluctuations on the economy as a whole.