At the backdrop of sustained supply gap in Nigeria’s foreign exchange (forex) market, the local currency, Naira, has hit 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.
Our 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 local currency depreciated 3.9 percent W-o-W to N803.9/$ from N776.9/$ the previous Friday.
Our currency monitor shows that after the initial massive depreciation on June 14th, 2023 when the Central Bank of Nigeria, CBN, introduced reforms in the market, exchange rate had remained volatile with 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 who spoke to Financial Vanguard 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.
