• Wednesday, June 19, 2024
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Naira crashes to all time record low against dollar

Naira depreciation and the Nigerian consumers

Naira on Friday fell to N720 per dollar, lowest ever, following increased demand for the greenback on the parallel market, popularly called black market.

After trading on Friday, the local currency lost 0.83 percent of its value compared to N714 per dollar on Thursday.

With the current rate, naira has depreciated by 21.53 percent from N565 per dollar at the beginning of the year.

However, the exchange rate moderated to N716 per dollar at the close of business on Friday, one trader told BusinessDay.

The naira is likely to appreciate at the parallel market towards N670/$ -N680/$ in October 2022, according to Bismarck Rewane, managing director/chief executive officer of Financial Derivatives Company Limited.

Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN), had described the parallel market as “a tainted market in Nigeria, where people desire to deal in illegal foreign exchange (FX) transactions including sourcing of FX cash for purposes of offering bribes, corruption. That is where they deal.”

Nigeria’s currency has been on a free fall as a result of rising strong dollar, import demand, oil theft, fuel subsidies, currency speculation, record high money supply and weak productivity, analysts have said.

In the face of rising demand for foreign exchange for both goods and services by Nigerians, the CBN has advised Nigerians to resist the urge of succumbing to the speculative activities of some players in the foreign exchange market.

Read also: Pound collapses against dollar, inches closer parity with fresh 37-Year Low

At the Investors and Exporters (I&E) forex window, also known as the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX), naira appreciated marginally by 0.04 percent as the dollar was quoted at N436.33/$ on Friday as against N436.50/$ quoted on the previous day, data obtained from the FMDQ indicated.

Most currency dealers who participated at the foreign exchange auction on Friday maintained bids between N425.00 (low) and N438.00 (high) per dollar.

The daily foreign exchange market turnover increased marginally by 4.29 percent to $106.11 million on Friday from $101.74 million recorded on Thursday, the data indicated.

Nigeria has a multiple exchange rate system, resulting in persistent currency pressures due to a distorted market structure, Rewane said.

He noted that dollar shortages remain the principal challenge, undermining the performance of the non-oil sector, Nigeria’s exports still largely dominated by oil and oil-related products.

Rewane said the CBN is likely to allow an adjustment at the I&E window towards N440/$ and that the CBN will increase forex supply at the window.

On July 27, 2022, the CBN stopped foreign exchange sales to the Bureau De Change (BDC) and channelled the sale of dollars to commercial banks for legitimate needs.

Naira has depreciated by 25 percent at the parallel market known popularly called black market, one year after the Central Bank shutdown the abokifx platform.