Naira Hits New Low at N820/$ as Forex Supply Gap Persists
The Nigerian naira has reached a new low against the US dollar, trading at N803.9/$ in the Investors & Exporters (I&E) window and N822/$ in the parallel market. The sustained supply gap in Nigeria’s forex market has contributed to this depreciation.
According to reports, there was a 6.6% decline in the volume of dollars traded in the I&E window, disappointing dealers who were expecting an increase in supply. In the parallel market, there was a week-on-week depreciation of 5.5% to N822/$, compared to the previous week’s closing rate of N779/$.
Since the introduction of reforms by the Central Bank of Nigeria (CBN) on June 14, 2023, the exchange rate has remained volatile, with fluctuations leading up to the record low witnessed recently. The reforms aimed to eliminate multiple exchange rates and reintroduce the ‘Willing Buyer Willing Seller’ market model in the I&E window.
Despite these measures, the naira has experienced a cumulative depreciation of 70% (N321.23) in the I&E window and 7.0% (N58) in the parallel market. The closing rates from last week also indicate a widening of the parallel market margin, which had initially narrowed following the policy changes.
Forex market operators have expressed concerns that the expected increase in supply has not materialized, attributing the renewed depreciation of the naira to rising demand and hoarding. The scarcity of dollars in banks and limited access to foreign currency by Bureau De Changes have further exacerbated the situation.
Market operator Mr. Ahmed Danjuma noted the difficulty in obtaining dollars due to its scarcity and the high demand. He likened the demand for dollars to food being brought into a prison, emphasizing the low supply and limited access to foreign currency even for Bureau De Changes.
