Wednesday, July 27, 2022: The Naira has maintained a downward trajectory in the parallel market since the beginning of the year, but the downswing in its value in the past week has been steeper than ever witnessed before. It declined severely today to hit a new all-time low against the dollar in the parallel market. According to the information obtained from BDC operators in Lagos, naira exchanges for N700/$.
The currency, which stood at about N665/$1 in the parallel market as of the close of trading yesterday, has shed off N5 to exchange for N700/$. This represents the highest decline to be ever recorded.
Some BDC operators and FX marketers in Lagos who confirmed the current rate told our analysts that the sharp fall in the price of the naira is a result of the scarcity of dollars in the market. Additionally, the high demand for the greenback has its impact.
Notably, the scarcity of the greenback in the market is putting a lot of pressure on the naira, thereby driving down the value of the currency of Africa’s largest economy. Similarly, in the official Investors and Exporters (I&E) window, a lesser amount of transactions was carried out in the market as of the close of trading yesterday. With a total of $58.03 million traded, representing a decline of 35 percent from the $89.7 million traded the previous day.
The increasing foreign exchange (FX) strains are widening the gap between the exchange rates in the official and unofficial parallel markets. This gap has placed the exchange rate premium in the forex market at N269, thereby creating more opportunities for arbitrageurs.
What You Should Know?
- With the foreign reserve of Nigeria remaining in the N39 billion corridor, meaning the CBN still has a long way to go in raising the foreign exchange earnings of the country.
- One of the lasting solutions to foreign exchange shortages in the country is the improvement of export earnings.
- Marketers affirm the scarcity and increasing difficulty in buying the dollar and that the exchange rate may still rise further.
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