Exchange rate gap closes as naira falls to lowest at official market

The exchange rate gap/spread between the official and the parallel market on Friday closed to N99 per dollar as naira fell to an all-time low of N1,099.05/$ at the official foreign exchange (FX) market.

The black market rate was N1,198 per dollar on Friday. With the current rates, the gap between the two segments of the FX market has closed by over 100 percent (5,309.83%) to N99 compared to N1.83 per dollar on June 21, 2023 after the unification of the exchange rate windows by the Central Bank of Nigeria (CBN).

The spot trading rate further closed the gap between the official spot segment and the parallel market to N22/$. The spot rate was N1,176 as of December 7, 2023 while black market was N1,198/$ as of December 8, 2023.

The CBN on June 14, 2023 collapsed all segments of foreign exchange markets into the Nigerian Autonomous Foreign Exchange Market (NAFEM), formerly, the Investors’ and Exporters’ (I&E) forex window.

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All eligible FX transactions in the market shall only be done via the NAFEM window; all other windows cease to exist.

The NAFEM market functions by a willing buyer, willing seller system, where an entity with demand for FX seeks out another entity with FX to sell at an agreed price through an authorised dealer.

The Federal Government said it targets an exchange rate of N650 to N750 to the dollar by December this year.

This was disclosed by Taiwo Oyedele, chairman of the presidential committee on fiscal policy and tax reforms.

Also, JPMorgan, an American multinational financial services firm, has predicted the naira to strengthen to N850 to the dollar by the end of the year.

Tope Fasua, a special adviser to President Bola Ahmed Tinubu, was reported to have projected that the naira may strengthen further to exchange at N600/$1.

The public has raised concerns over achieving the said target by the end of December, which is going to end in the next three weeks and the fact that the naira is currently as low as N1,1198 per dollar at the unofficial market and around N1,099.05/$ at the official market.