Currency traders say a shortage of foreign exchange liquidity is driving the recent depreciation of the naira, blaming weak inflows and rising demand at the end of the year. They say foreign investors are repatriating dividends while remaining cautious about new investments, increasing pressure on the currency.
At the official market, the naira closed at ₦1,466.5 to the dollar on Friday, December 19, its weakest level in nearly two months, after five consecutive days of losses. Central Bank of Nigeria data also shows a decline in external reserves to about 45.2 billion dollars, down from 45.47 billion dollars a week earlier.
The President of the Association of Bureau De Change Operators of Nigeria, Aminu Gwadebe, said expected foreign exchange inflows linked to the festive Detty December period have fallen short. He added that speculative activity and a preference among Nigerians to hold foreign currency as a store of value have further reduced confidence in the naira.
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The traders noted that the Central Bank recently injected 150 million dollars into the market and licensed 82 new bureau de change operators to boost liquidity. Analysts say sustained pressure on the naira is also linked to weaker foreign portfolio inflows, declining foreign direct investment, and strong year end demand for dollars.
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