The naira fell to a record low of 1,600 per dollar on Thursday, according to data obtained from multiple traders, as foreign exchange shortages persist on the parallel market, commonly referred to as black market.
The naira depreciation followed a strong demand for dollars by speculators as well as individuals traveling for business, tourism, education and health, according to currency dealers.
With the current exchange rate, naira has lost 1.26 percent of its value against the dollar when compared with the N1,570 per dollar offered by some traders on Wednesday. Against the N1,400 which the dollar was sold for on the first trading day of February, the naira lost 11.95 percent at the black market.
The naira however gained by 0.3 percent to N1498/$ in the official market on Thursday, according to data from FMDQ Securities Exchange, which calculates the rate. The currency gained after the Central Bank of Nigeria (CBN) sold a little above $100 million to banks that did not get dollars in Tuesday’s sale of about $86 million.
The gap between the official and parallel market seems to be widening again despite the CBN’s best efforts to tame the gap. The gap, which had narrowed to under 2 percent only last week, jumped to 6 percent on Thursday.
A street trader at the Airport told BusinessDay that dollars are scarce in the parallel market because the CBN has blocked their source of dollar supply.
In a pivotal move aimed at bolstering dollar supply in the country, the CBN on July 10, 2023 announced the revocation of a longstanding ban on diaspora remittance payouts in Naira currency. The decision signifies a significant shift in policy, enabling banks and International Money Transfer Operators (IMTOs) to disburse funds to beneficiaries in local currency.
In response to the circular, banking institutions and IMTOs are gearing up to implement operational adjustments to accommodate the revised remittance framework by issuing notice to their customers.
Furthermore, the Central Bank’s decision is expected to engender a ripple effect, catalyzing increased remittance inflows and bolstering the country’s foreign exchange reserves.
The FX market in Nigeria experienced a significant 56.58 percent decline in dollar supply on Wednesday, just two days after witnessing a surge in liquidity driven by the CBN’s interventions.
An analysis of the FX market auction showed that banks and other key players in the market sold a total of $117.87 million on Wednesday, a sharp drop from the $271.50 million recorded just the day before on Tuesday at the official FX market.
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