Emmanuel OchayiThe exchange rate between the Naira and the US Dollar saw a drop to N869.91 per dollar on Tuesday at the official market. This development marks an N60.89 loss, representing a 6.99% decline in the local currency compared to the N809.02 it had closed at the previous week.
It’s worth noting that this is the second time the Naira has taken a hit since the Central Bank of Nigeria initiated its mission to clear a backlog of foreign exchange (FX) last week.
The fluctuations in the Naira-Dollar exchange rate have created quite a stir in the financial market, with the intraday high hitting N1,100 per dollar and the intraday low plummeting to N700.00 per dollar. This N400 spread per dollar highlights the volatility of the market.
READ ALSO: Naira Falls To N809/$1 In Official Market, Appreciates 16.8% In Black Market
Data sourced from the official NAFEM window reveals that the forex turnover at the close of the trading session amounted to $70.92 million, marking a 19.08% decrease compared to the previous day. These wild swings have raised questions about the stability of the Naira in the official market.
However, a curious paradox is taking place in the black market, where forex is traded unofficially. The exchange rate here experienced an unexpected appreciation, with quotes ranging from N1,050 to N1,062.10 per dollar.
This difference between official and unofficial rates is raising eyebrows, and it appears we are inching closer to achieving parity between the two, a situation that was unimaginable in the past.
One significant factor influencing these shifts in the currency market is the Central Bank of Nigeria’s efforts to clear the backlog of foreign exchange forward contracts. This move is expected to bring much-needed relief to the Naira, the business community, and the Nigerian economy as a whole.
Nigeria has been grappling with dollar shortages since foreign investors withdrew their investments from local assets during a period of low oil prices. These investors have been slow to return, and the central bank has struggled to meet the growing demand for dollars from foreign investors seeking to repatriate funds or airlines needing foreign currency for ticket sales abroad.
On October 23, the finance minister, Wale Edun, announced that Nigeria is expecting $10 billion in inflows to improve FX market liquidity. This news is a ray of hope for local lenders who have been struggling to meet their customers’ demands due to the persistent dollar shortages in Africa’s largest economy.
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