Against the backdrop of sustained supply gap in Nigeria’s foreign exchange (forex) market, the national currency – Naira – receded to a new low at the weekend, trading N803.9 to a dollar in the Investors & Exporters (I&E) window, which is the official forex market and N822/$ in the parallel market.
Findings indicated a 6.6 per cent decline in volume of dollars traded in the I&E window as dealers said they were disappointed that the increase in supply they expected last week did not materialize.
A week-on-week trend in the parallel market shows a 5.5 percent depreciation to N822/$ as against N779/$ closing rate previous week.
In the I&E window, the national currency depreciated 3.9 percent W-o-W to N803.9/$ from N776.9/$ the previous Friday.
After the initial massive depreciation on June 14, 2023 when the Central Bank of Nigeria (CBN) introduced reforms in the market, exchange rate had remained volatile, experiencing daily fluctuations until the record low was hit last weekend.
The reform majorly eliminated multiple exchange rates and reintroduced the ‘Willing Buyer Willing Seller’ market model in the I&E window.
Since the new measures were introduced, the Naira has depreciated cumulatively in the I&E window and parallel market by 70 per cent (N321.23) and 7.0 per cent (N58) respectively.
Meanwhile, last week’s closing rate also indicated that the parallel market margin that narrowed to almost elimination following the new policy has started widening.
While the measures announced by CBN was aimed at increasing transparency and boosting confidence in order to attract increased forex supply, forex market operators said the expected increase in supply is yet to materialize, adding that this, coupled with rising demand, and hoarding, are the factors driving the renewed depreciation of the Naira in both segments of the forex market.
A parallel market operator on Lagos Island, Ahmed Danjuma, said: “I bought a dollar for N810 and sold for N819 and N820.
“People are demanding for the dollar. It is not easy to get dollars from the bank because it is very scarce.
“When you have access to dollars the way buyers demand for the currency is like when you take food to the prison.
“The supply is very low. Even Bureau De Changes have little access to the foreign currency.”
Similarly, a parallel market operator in the Ikotun area of Lagos, Umoru Mohammed, said: “Dollar was very scarce today (last Friday); We could not even get it from the banks.
“Every day the demand for dollars increases but the supply is very little. This is really hindering business especially for transactions requiring dollars.”
The President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said: “The situation is tough, it even traded at N822 in some segments today (last Friday).
“You know now the restrictions have been removed, there is also competition and surge in demand. Most people are still holding assets in dollars, and we have not seen significant inflows even from the side of the investors.”
