The naira has hit a record low of N1,667.42 per dollar in the official market as of Wednesday, marking a significant decline just one day after the Central Bank of Nigeria (CBN) announced a surprise hike in its benchmark interest rate to 27.25 percent. This increase aims to combat core inflation and stabilize the exchange rate market.
During Wednesday’s trading session, the naira depreciated by 0.54 percent, closing at N1,667.42/$ compared to the previous day’s rate of N1,658.48/$. In the parallel market, the local currency fell to a seven-month low, exceeding N1,700 per dollar—its lowest point since February 22, 2024, when the dollar was valued at N1,850/$.
A black market operator in Lagos remarked on the scarcity of the dollar, stating, “Dollar is very, very scarce in the market.” Following the CBN’s announcement of the Monetary Policy Committee’s (MPC) interest rate increase for the fifth consecutive time this year, the naira dropped by N95.83 in the official foreign exchange market on Tuesday, September 23, 2024.
By the end of trading on Tuesday, the naira had lost 5.8 percent of its value, with the dollar quoted at N1,658.48/$, a significant drop from N1,562.66/$ traded on Monday at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
Olayemi Cardoso, governor of the CBN, highlighted the MPC’s recognition of the ongoing growth in money supply, emphasizing the need to curb excess liquidity in the system and address the pressures driving foreign exchange demand. He expressed concerns about the rising fiscal deficit but noted the fiscal authority’s commitment to avoid monetary financing through “Ways & Means.” Cardoso also pointed out the correlation between Federal Account Allocation Committee (FAAC) releases and banking system liquidity, suggesting increased monitoring to mitigate impacts on price stability.
Muda Yusuf, director/CEO of the Centre for the Promotion of Private Enterprise (CPPE), criticized the rate hike, arguing that it would not effectively address deeper economic issues. He cautioned that the increase in interest rates was placing undue pressure on borrowers.
Recent data from the CBN shows that the money supply (M3), a broad measure of the total money in circulation, soared to N107.18 trillion in August 2024, representing a staggering 61.93 percent increase from N66.19 trillion in August 2023. Cardoso noted that money supply surged from about N19 trillion in 2025 to N54 trillion by 2023, largely fueled by ways and means financing.
“This substantial increase is primarily attributed to the printing of money, resulting in a large volume of currency chasing a relatively small amount of goods and services,” Cardoso explained. He added that while the economy averaged a growth rate of 1.2 percent during this period, the money supply increased by 12.6 percent, highlighting significant economic distortion.
In a bid to enhance liquidity in the foreign exchange market, the CBN announced on Wednesday that it would sell dollars to Bureau De Change (BDC) operators at a rate of N1,590 per dollar. This directive, issued by the CBN, aims to meet the growing demand for invisible transactions within the market. Eligible BDCs can purchase up to $20,000 to facilitate these transactions, with the CBN stating that this move would ensure sufficient liquidity.
The directive, signed by W.J. Kanya, acting director of the trade and exchange department, also specifies that BDCs can sell the dollars to end-users at a maximum margin of one percent above the CBN’s purchase rate. To participate in this transaction, BDC operators must make the necessary naira payments to the CBN’s deposit accounts and submit required documentation at designated CBN branches in Abuja, Awka, Kano, and Lagos.
BDC operators have welcomed this initiative, indicating it will provide much-needed relief to the forex market. One operator remarked, “This will help stabilize the market and give us the ability to meet customer demands more efficiently.”
