The naira has crashed massively against the dollar at the foreign exchange market on Monday.

FMDQ Data showed that the naira dropped to N1670.65 per dollar on Monday from N1600 exchanged last Friday.

This represents a N70.65 depreciation.

Similarly, at the parallel market, the naira fell to N1746 per dollar on Monday from N1740 traded at the close of last week.

The development comes after foreign exchange transaction turnover dropped significantly to $81.17 million on Monday from $284.93 million on Friday.

About 42.3 million litres of imported Premium Motor Spirit (PMS), commonly known as petrol, is set to arrive in Nigeria, according to oil marketers on Friday. They emphasized the need for local refineries to boost output as importation remains necessary to meet domestic fuel demand.

Petrol dealers pointed out that imports would continue until Nigeria’s local production, including from modular refineries and the Dangote Petroleum Refinery, can sufficiently supply the market. As of now, production levels at these refineries fall short, compelling dealers to rely on imported supplies of diesel and petrol.

In early September, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) announced that the Dangote Refinery would initially supply 25 million litres of petrol daily, rising to 30 million litres starting in October 2024. According to NMDPRA, an agreement was reached with NNPC to supply local crude to Dangote’s refinery in Nigerian currency.

“NNPC has agreed to commence crude oil sales to Dangote Refinery in naira, starting with a supply of 25 million litres of PMS this September, which will increase to 30 million litres by October 2024,” NMDPRA posted on social media.

However, oil marketers claim the Dangote facility, valued at $25 billion and based in Lekki, has not yet reached these volumes, making further imports necessary to fill the gap. One major dealer, who requested anonymity, reported, “We expect about 32,000 metric tonnes of PMS to arrive next week, equivalent to around 42.3 million litres.”

Two prominent marketers are collaborating on the importation, supplementing supplies previously brought in by other dealers. “The consignments are shared between major marketers. This doesn’t exclude us from buying from Dangote Refinery, but in a deregulated market, we have the freedom to source competitively,” the dealer explained.

From October 18 to 20, 2024, four vessels carrying approximately 123.4 million litres of petrol docked at Nigerian ports, enhancing fuel supplies nationwide. These deliveries confirm a recent report that revealed oil marketers are actively importing fuel to support the Dangote Refinery’s limited output.

Another dealer commented, “Many marketers are ramping up imports, while those who cannot import buy from Dangote. The market’s now open, so everyone sources as they need. It’s essential, especially since local production is still insufficient.”

The National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Chief Ukadike Chinedu, confirmed that while IPMAN members haven’t yet started importing PMS, the market is now open to anyone with the capacity to import.

The Nigerian naira experienced a mixed performance on October 25, 2024, with a slight depreciation in the parallel market and a notable gain in the official market. The currency weakened by 0.12% against the US dollar, trading at N1,730/$1 in the parallel market—a marginal decline of N2 from the previous rate of N1,728.

This marks the second consecutive day of depreciation following a 0.58% appreciation on October 23, when the naira was valued at N1,725/$1. Meanwhile, in the Investors and Exporters (I&E) window, the naira reversed a threeday depreciation streak, closing at N1,601.20/$1, a 3.30% improvement from the prior close of N1,654.09.

Since October 15, the naira has consistently traded above the N1,600 threshold in the official market. The gap between the parallel market rate and the official rate has widened significantly, increasing to N128.80, up from the previous day’s difference of N73.91. Additionally, data from the Nigeria Association of Financial Markets Institutions (NAFEM) revealed a 69% surge in foreign exchange transactions, totalling $230.99 million, compared to $136.68 million previously.

CBN Reserves and Policy Measures

The Central Bank of Nigeria’s (CBN) external reserves saw a 0.188% rise to $39.230 billion on October 22, 2024, marking the ninth consecutive day of growth. Recent CBN policies, including interest rate hikes aimed at curbing inflation and stabilising the economy, appear to be stabilising the domestic currency. The CBN has also cleared backlogs of foreign exchange obligations, including payments to airlines.

Market Trends

Throughout 2024, the naira has faced sustained depreciation, losing over 50% of its value since the beginning of the year in the official market. In January, the currency traded at N838.95/$1 and breached the N1,500/$1 mark in February. A brief rally in March saw it recover to N1,300.43/$1, before reaching a record low of N1,660.5/$1 in October.

In the parallel market, the naira started the year at N1,215 per dollar, reaching an alltime low of N1,880 in February before recovering to N1,110 in April. However, it has since resumed a downward trajectory, recently dipping into the N1,700 range.

Key Data Points

On October 24, 2024, the naira traded as high as N1,696 per dollar and as low as N1,585.43/$1, reflecting a disparity of N110.57 before settling at N1,601.20 in the I&E window.

By October 25, the naira traded at N1,730 per dollar in the parallel market, indicating a slight 0.12% decline from the previous day’s rate of N1,728.

In the I&E window, the currency closed at N1,601.20/$1, demonstrating a 3.30% improvement from the prior close of N1,654.09.

Trading volumes in the I&E window surged, reaching $230.99 million compared to $136.68 million the day before, highlighting increased market activity and dollar demand.

Key Factors at Play

During a recent press briefing at the ongoing World Bank/IMF meetings, the newly launched Global Financial Stability Report underscored signs of stability in the Nigerian naira, largely attributed to recent CBN policies. The International Monetary Fund (IMF) noted that the naira’s steadiness results from actions taken by the CBN, including clearing the foreign exchange backlog and raising interest rates.

The report indicated that these policy measures have led to positive developments, contributing to the naira’s improved stability.

What to Expect

With the naira recently breaching the N1,700/$1 mark, there is potential for a shortterm recovery. Global oil prices have stabilised between $79 and $81 per barrel, and the CBN’s consistent interventions may alleviate some inflationary pressures, fostering a more positive outlook for the naira. Additionally, new policies aimed at reducing foreign exchange demand could further support the currency, potentially bringing it back into the N1,600/$1 range in the near term.

Notably, the official exchange rate closed at N1,601.20 on October 25, following the CBN’s $60 million intervention in the official market on October 17, when dollars were sold to deposit banks at N1,540.

Nevertheless, the naira’s trajectory will remain closely tied to broader macroeconomic factors, including inflationary pressures and foreign currency supply. As Nigeria navigates these challenges, the effectiveness of policy responses will be crucial in determining whether the naira stabilises or faces further depreciation.