Naira weakens across FX markets as dollar scarcity persists

The foreign exchange market closed on Wednesday with Nigeria’s currency weakened across all market segments.

Traders attributed the Naira depreciation to increased demand due to speculation. The foreign exchange market has been under pressure since March 2020 following a sharp drop in oil prices as a result of the Covid-19 pandemic.

Naira dropped in value by N3 as the dollar traded at an average rate of N486 on Wednesday as against N483 traded on Tuesday.

Investigation shows that in some parts of Lagos, Naira sold for N485, while in some parts of Abuja and Kano it sold for N487.

Godwin Emefiele, governor of the CBN said on Tuesday that the black market is a shallow market of only about five percent of the foreign exchange market which is patronised by people who go there for cash to offer bribes and corruption. Parallel market is the place where people who don’t want to provide documents go, he said.

“At the E& I (Import& Export) Window, the rate is about N386 or N387 / $1. We don’t control the I & E window. Why will anyone use the parallel market to say that the exchange rate is over N480/$1,” Emefiele said.

The local currency also lost N3 at the end of business on Wednesday at the Bureau De Change (BDC) segment as the dollar sold for N485 compared to N482 on the previous day.

This is in spite of dollar disbursement to BDCs on Tuesday. The BDCs funded their accounts on Wednesday in anticipation of dollar allocation on Thursday by the Central Bank of Nigeria (CBN).

The Apex bank sells $10,000 twice weekly to the BDC segment of the foreign exchange market.

At the Investors and Exporters (I&E) forex market, Naira depreciated significantly by 2.01 percent as the dollar was quoted at N393.25 as against the last close of N385.50.

Analysts at FSDH research noted that most participants maintained bids between N382.00 and N394.83 per dollar.

The foreign exchange daily turnover declined by 68.21 percent to $52.09 million on Wednesday from $163.87 million recorded on Tuesday, data from FMDQ indicated.