Naira, the currency of Nigeria, experienced a depreciation
against the US dollar on Monday, declining
by 0.38 percent or N3/$1 at the
parallel market, commonly known as the black market. This depreciation was
primarily attributed to a surge in demand for dollars, particularly from
individuals seeking to travel for educational purposes, tourism, or business
ventures.
During the intra-day trading on Monday, the exchange rate for
the dollar was quoted at N773, which was higher than the N770 rate quoted on
the preceding Friday at the black market. Traders analyzing the situation noted
that the elevated demand for dollars was the primary factor responsible for the
decrease in the exchange rate compared to Friday.
This depreciation trend was not limited to the black market
alone. On the previous Friday, the naira had already experienced a depreciation
of 0.65 percent at the Investors and Exporters (I&E) forex window.
According to data from the FMDQ, the dollar was quoted at N770.17, as opposed to
the N765.13 rate quoted on Thursday. This downward trend in the naira’s value
has been a concern for traders and the general public alike.
On June 14, 2023, the Central Bank of Nigeria (CBN)
implemented significant changes to the official foreign exchange (FX) market.
It abolished certain segments and introduced the I&E Window, which
reintroduced the concept of a “Willing buyer and Willing seller”
system. As a result of this adjustment, the official exchange rate increased
from N463.38/$ to N632.77/$ and has since maintained an average of N669.0/$, as
reported by Agusto & Co, a Pan-African Credit Rating Agency.
The report by Agusto & Co also highlighted the multiple
exchange rate system that prevailed under the leadership of the suspended CBN
governor, Godwin Emefiele. This system heavily relied on a controlled official
rate, which restricted liquidity for both businesses and individuals.
Consequently, the limited availability of foreign currency in the official
market led to a surge in demand in the parallel market, where exchange rates
carried a substantial premium.
The ongoing depreciation of the naira against the US dollar
raises concerns about the stability of the currency and its impact on the
Nigerian economy. It remains to be seen how the central bank and relevant
authorities will address this issue and implement measures to stabilize the
currency and manage the demand for foreign currency in the country.
