Nigeria’s currency on Wednesday fell to all-time low of N860 per dollar at the parallel segment of the foreign exchange (FX) market, also called the black market.
The naira depreciation followed strong demand for dollars by individuals and importers who want to travel for summer holidays and business, a trader said.
One of the traders who gave his name as Bala said, “there’s dollars in the market, and we have buyers too”.
The foreign exchange market opened on Wednesday with naira depreciating to N830. This represents 3.48 percent (N30) lost in naira value in less than 12 hours.
At the Investors’ and Exporters’ (I&E) forex window, naira also weakened by 6.83 as the dollar was quoted at N793.70 on Wednesday as against N742.93/$1 quoted on Tuesday, data from the FMDQ indicated.
Willing buyers and sellers maintained bids as high as N853.00 and N699.50, lower bids were recorded during the FX market auction.
Read also: Naira gains 6% against dollar at I&E window
The daily foreign exchange market turnover increased significantly by 152.35 percent to $87.19 million on Wednesday from $34.55 million recorded on Tuesday.
On June 14, 2024 the CBN collapsed all segments of the FX market into I&E window, Nigeria’s official foreign exchange market, and re-introduced the willing buyer and willing sellers.
Consequently, the official exchange rate rose from N463.38/$ to N793.70, the current rate.
Despite the CBN’s floating of the naira, a large supply deficit remains in the fx market, said analysts at FBNQuest.
“Therefore, we expect substantial volatility in the naira exchange rate, at least in the near term. Also, we do not see an increase in liquidity from foreign portfolio investors as they will likely remain on the sidelines until they can repatriate a substantial proportion of their trapped fx funds, estimated at roughly USD3bn. In this context, we see an end-year rate of N825/USD,” the analysts said.
According to the analysts, sweeping reforms revamped the foreign exchange market, uniting fragmented market segments, eliminating trading restrictions, and bridging the gaping chasm between the official and parallel market rates. These actions aim to attract investments and stimulate economic growth.
“We are optimistic that the policy reforms investors have embraced will steer the nation towards a positive growth trajectory and lay the foundation for sustainable growth,” the analysts said.
