Concerns mount as naira depreciates further at official, black markets

Concerns mount as naira depreciates further at official, black markets  

The situation has remained bleak for industry operators, businesses and other people in Nigeria needing dollars and other strong global currencies as the naira further declined against the dollar on Monday in both the official and black markets.

The domestic currency depreciated by 2.54 per cent to close at N925.34 to a dollar at the close of business, based on data from NAFEM where forex is officially traded.

This represents an N22.89 loss or a 2.54 per cent decrease in the local currency compared to the N902.45 it closed the previous day.

Similarly, the naira depreciated at the parallel forex market where forex is sold unofficially, the exchange rate quoted at N1360/$1, representing a 0.74 per cent decrease over what it closed the previous day, while peer-to-peer traders quoted around N1371.02/$1.

Again, credit ratings agency Fitch recently stated that the Central Bank of Nigeria does not have the resources to address the shortage and clear the forex backlog.

The country’s high debt service to revenue ratio is also said to be contributing to a challenging sovereign credit rating.

Gaimin Nonyane, Fitch’s Director of Middle East and Africa Sovereigns, expressed that the ongoing foreign exchange shortages in Nigeria would exert pressure on the naira. Currently, there exists a 30 per cent disparity between the official and parallel exchange rates.

She said, “We think that the central bank is still very well short of the amount it needs to be able to clear the foreign exchange backlog and also meet the extremely large external financing by the private sectors,”

Nonyane and Toby Iles, Fitch’s Head of Middle East and Africa Sovereigns, cautioned that Nigeria’s interest payments to revenue ratio, surpassing 40 per cent, posing a significant weakness for its credit rating four times higher than the median for B-rated sovereigns.

 

Nigeria’s debt levels have been a cause of concern to many in recent times. In the first quarter of 2023, the debt service to revenue rose to 183 per cent.

Nigeria’s total public debt as of Q3, 2023 stood at N87.9 trillion.

In the 2024 budget proposal presented to the National Assembly, the Federal Government intends to borrow N7.83 trillion to address a budget deficit of N9.18 trillion.