Naira on Wednesday fell to a lowest of N1,030 per dollar on the parallel market, following increased demand for the greenback amid supply shortage.
This represents 1.98 percent lower than N1,010/$1 traded on Tuesday at the black market.
“A lot of people who could not get dollars from the bank are coming to us to buy,” one street trader told BusinessDay on Wednesday.
Naira on Monday resumed depreciation against the dollar, after exchanging steady for four trading days at the parallel market.
At the Investor’ and Exporters’ (I&E) forex window, the naira depreciated by 1.43 percent as the dollar was quoted at N776.80 on Wednesday compared to N765.83/$1 quoted on Tuesday. It was weaker than N773.54$1 exchange on Monday, and N741.85 on Friday, data from the FMDQ indicated.
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Nigeria’s foreign exchange market market continues to experience pressure, despite rates unification in June 14, 2023 by the Central Bank of Nigeria (CBN).
Despite the exchange rate unification, FX inflows into Nigeria are lagging, a report by FSDH Research stated.
On the other hand, the demand for foreign currency remains high thereby creating pressure on the exchange rate. In addition, limited access to FX in the official market (delays, backlogs, documentation requirements) are incentivizing players to purchase FX in the black market.
“On a positive note, the government removed the peg on the official exchange rate in June 2023. This suggests some level of commitment to exchange rate reforms. The President is also at the forefront of wooing investors with the Nigeria-India Business Summit as an example.
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“To win back investor’s confidence, we believe that the government must intensify its efforts in curtailing oil theft in the short term and provide a clear roadmap to improve FX inflows and management in the medium to long term to assure top institutional investors. In the immediate term, we expect the Naira to continue to face pressure in the official market,” analysts at FSDH Research said.
Muda Yusuf, CEO, Centre For the Promotion of Private Enterprise, said, the Central Bank of Nigeria must ensure strategic and transparent intervention in the forex market to minimize volatility, as far as the reserves can support.
He said in addition to the I&E window, it has become necessary to create an autonomous window in the banking system where the currency can trade freely without any encumbrances. This is necessary to avert the diversion of remittances to other jurisdictions or the black market. “We cannot afford to live in denial at this time,” he said.
