Naira ends turbulent May at N1,485.99/$1 on official market

After two days of substantial depreciation in a week characterized by significant volatility in the foreign exchange market, the naira showed signs of stabilizing as it closed at N1,485.99/$1 on Friday, May 31, 2024. 

This marks a slight decline of 0.08% from the previous day’s close of N1,484.75/$1, and the lowest depreciation rate since January 19, 2024, amid CBN’s interventions. 

How the week went

• The naira experienced a tumultuous week in the foreign exchange market, culminating in a relatively stable close at N1,485.99/$1 on May 31, 2024, according to data from the FMDQ.
• The currency’s performance this week reflects a significant struggle to maintain its value amidst fluctuating forex turnover and investor sentiment.
• The naira started the week on a bright note, closing at N1,339.33/$1 on May 27, marking a 10.71% appreciation in value. Forex turnover on the NAFEM window was recorded at $180.8 million, a drastic 67.50% decline from previous figures. This significant drop in turnover highlighted the volatile trading environment and reduced market liquidity.
• On May 28, the naira maintained a rebound, appreciating by 14.09% to close at N1,173.88/$1. Forex turnover saw a substantial increase to $328.32 million, an 81.59% rise, indicating a surge in market activity and possibly a short-term confidence boost among traders and investors.
• However, this rally was short-lived as the naira depreciated by 11.72% the following day, closing at N1,329.65/$1 on May 29. Despite the negative performance, forex turnover remained robust at $336.54 million, a slight increase of 2.50%.
• The downward trend continued into May 30, with the naira closing at N1,484.75/$1, reflecting a 10.45% decline. Forex turnover dropped significantly to $235.41 million, a 30.05% reduction, highlighting the persistent challenges in maintaining market stability and liquidity.
• However, the naira slowed to a marginal depreciation of 0.08% on Friday. Forex turnover decreased further to $213.52 million, a 9.30% decline. This closing rate suggests that while the naira has managed to stabilize somewhat, the pressures on the currency remain.

This marginal change suggests a possible stabilization as market participants adjust to the new rates and the Central Bank’s interventions to manage liquidity. The reduced turnover could be indicative of a wait-and-see approach by investors and traders, reflecting cautious optimism.