Foreign exchange users who patronise the unofficial market may be worse off now as Naira exchanges with the dollar at N615, lowest ever, following scarcity of the greenback, traders told BusinessDay on Friday.
With the current rate Naira has lost 8.85 percent of its value since the beginning of the year when it exchanged at N565 with the dollar at the parallel market.
The traders said the dollar shortage worsened as demand from Nigerians traveling for pilgrimage increased.
A total of 43,008 pilgrims from Nigeria are expected to join other pilgrims from across the world to perform this year’s Hajj according to a media report quoting the National Hajj Commission of Nigeria (NAHCON).
The Nigeria Christian Pilgrims Commission (NCPC) said in May 2022 that it expected that at least 10,000 faithful would go on pilgrimage from Nigeria in 2022.
The 2022 pilgrimage the NCPC noted would begin in Nigeria on May 31 when the faithful will travel to Israel and Jordan.
In the Nigerian FX market, the parallel market rate worsened last week as the Naira depreciated by N2.00 to finish the week at N608/$1.00 despite marginal accretion to the foreign reserves in recent times. Similarly, the exchange rate at the Investors and Exporters (I&E) forex window fell by N0.08w/w to N421.33/$1.00, according to a report by Afrinvest Securities Limited.
“We do not foresee any positive triggers as the pass-through of pressure from Naira liquidity and tighter policy in advanced economies continues to depress the Naira,” analysts at Afrinvest said.
The Naira exchange rate on the first trading day in 2022 stood at N422/US$ on the I&E Window. It appreciated to N416.50/US$ as at 15th March 2022.
As of Thursday Naira appreciated by 0.08 percent as the dollar was quoted at N420.17 as against the last close of N420.50. Most currency dealers who participated in the foreign exchange market auction maintained bids between N412.00 and N444.00 per dollar.
Godwin Emefiele, governor of the CBN said in March 2022 that Naira has remained largely stable at the Investors and Exporters window, following the demand management policy of the Central Bank.
The World Bank said on June 14, 2022 that despite the recovery in exports and economic activity in 2021, the CBN’s FX supply in the I&E window declined by 41 percent in 2021 relative to 2020. At the same time, the Nigeria Autonomous Foreign Exchange (NAFEX) remained broadly stable in 2021, the parallel exchange rate depreciated by as much as 16 percent in a context of FX scarcity.
As a result, the premium between the parallel exchange rate and the NAFEX widened from 21 percent to 37 percent. The CBN has also signalled that it would stop selling FX to commercial banks by end-2022, and has introduced an FX repatriation rebate program in February.
On July 29, 2021, the CBN announced the immediate discontinuance of foreign currencies sales to Bureaux de Change (BDC) operators in Nigeria, and channelled the sales of foreign exchange for legitimate needs to the banks.
Nigerian banks had in May commenced a review of dollar request processing time for school fees, upkeep and rent payment, following dollar shortages.
This according to the banks was due to limited foreign exchange availability provided by the CBN.