Naira depreciates further at black market on strong demand

Nigeria’s currency on Friday depreciated further by 0.39 percent to close at N510 per dollar as against N508/$ closed on Thursday at the black market.

The drop in the value of the naira was due to strong dollar demand as consumers who could not meet requirements for accessing foreign exchange in the banks went to the black market to purchase the dollar.

On Thursday naira lost 0.39 percent (N2) to the dollar as the Naira/dollar exchange rate closed at N508 as against N506/$ closed on the previous day at the parallel market, also known as the black market.

Read also: FX liquidity drops in July as naira loses N2

Naira fell sharply to N525 per dollar last week after the Central Bank of Nigeria (CBN) announced its plan to discontinue the sale of dollars to the Bureau De Change (BDC) operators due to foreign exchange arbitrage.

The local currency started firming up on Thursday, the following day after the Nigerian banks chief executives unanimously agreed to support and meet legitimate demand for dollars by the end-users.

The Central Bank of Nigeria on 27 July discontinued FX supply to the BDCs but asked banks to take over the duty of supplying FX to the wider public. The CBN Governor announced the decision during the MPC meeting, relating the action of the BDCs mishandling FX as putting the country’s financial system at risk as they looked for abnormal returns.

At the Investors and Exporters (I&E) forex window, naira weakened marginally by 0.06 percent as the dollar was quoted at N411.50k on Friday compared with N411.25k/$ closed on Thursday, data from the FMDQ revealed.

Currency traders who participated in the trading session on Friday maintained bids at between N400.00k and N412.50k per dollar.

The daily foreign exchange market turnover increased by 48.33 percent to $188.26 million on Friday from $126.92 million recorded on Thursday at the official market.

Nigeria’s foreign exchange market recorded 6.64 percent drop in liquidity as the monthly market turnover declined to $2.81 billion at the end of July 2021 compared with $3.01 billion in the preceding month of June 2021, according to data from the FMDQ.