Manufacturers may sack workers as naira loses 39%

The naira has depreciated by 38.9 percent against the United States dollar at the official I&E window of the Central Bank of Nigeria in the past three months.

Data obtained from the FMDQ Securities Exchange revealed that the local currency fell from N745.19/$ on October 3, 2023, to N1035.12/$ as of January 3, 2024.

While the naira depreciated from 471/dollar to about 700/dollar at the official market shortly after the announcement of the exchange rate unification policy of the CBN in June 2023,

At the parallel market, the local currency has been trading around 1,220/dollar in recent weeks.

On Sunday, manufacturers and other members of the organised private sector said the falling naira value at the official and parallel markets was having a severe negative impact on their bottom lines.

Specifically, the Manufacturers Association of Nigeria, Lagos Chamber of Commerce and Industry, as well as the Nigerian Association of Small-Scale Industrialists, said their members were already scaling down operations over the development, a situation that might lead to the sacking of more workers.

The naira volatility on the I&E window has continued despite recent efforts by the Federal Government to improve the liquidity of the FX market.

The naira began 2024 at N988.46/$, an 8.97 percent decline from the N907.11/$ it closed trading on the last day of 2023 on the official window. It further tumbled to N1035.12/$ on Wednesday, January 3. This decline in the value of the naira marked the third time that the naira has closed above N1000/$ on the I&E window.

On December 8, the naira fell to an all-time low of N1,099.05/$, and on December 28, 2023, it closed trading at N1043.09/$. On Friday, the naira closed trading at N869.39/$, recovering to close the week better than it started.

According to data from the FMDQ Securities Exchange, the naira has now lost about 38.91 percent of its value since October 3 when it closed trading at N745.19/$ on the I&E window.

On the day before the rate cap was removed by the CBN in June 2023, the naira closed trading at N471/$.

The continued decline of the naira is happening despite efforts, including clearing FX backlogs, by the government to boost liquidity in the foreign exchange market. Towards the end of 2023, the Minister of Finance and Coordinating Minister of Economy, Wale Edun, revealed that the Federal Government had received a $2.25bn foreign exchange support facility from the African Import-Export Bank.

According to the minister, the first tranche of its $3.3bn facility from the bank is aimed at resolving FX shortages in the economy.

In August, the Nigerian National Petroleum Company Limited announced it had secured a $3bn emergency crude oil repayment loan from the African Export-Import Bank to support the Federal Government’s effort to stabilise the foreign exchange rate.