In a remarkable turn of events, the Naira demonstrated its resilience, surging by an impressive 6.77% against the US dollar, even in the face of declining liquidity within the official market.
As the trading day drew to a close on Wednesday, the dollar was valued at N790.68, a significant drop from the N848.12 quoted just a day earlier at the Investors’ and Exporters (I&E) forex window, according to data from FMDQ.
Notably, the daily foreign exchange (FX) market turnover, which typically mirrors transaction levels, witnessed a substantial 47.96% decrease, falling from $134.28 million on Tuesday to $69.88 million on Wednesday.
Experts attribute the Naira’s ascent in the official market to a slight moderation in the demand for dollars, despite the ongoing shortage.
However, in contrast, the parallel market tells a different story. The Naira reached an all-time low of N1,100 per dollar by the end of Wednesday, representing a 3.77% loss from N1,060 per dollar during morning trading on the same day. This drop resulted from strong demand among end-users who couldn’t fulfill their dollar needs in the official market, as explained by a parallel market operator.
This disparity between the official and parallel market rates has now widened to N309.32 per dollar, a staggering 16,802.73% increase compared to the N1.83 exchange gap recorded on June 22, 2023, following the FX reform.
This significant shift in the forex market follows Nigeria’s Central Bank’s decision on June 14, 2023, to consolidate all foreign exchange market segments into the I&E forex window, aiming for a single forex market rate.
Muda Yusuf, the CEO of the Centre for the Promotion of Private Enterprise, anticipates that FX liberalization will unlock vast investment opportunities, job creation, and increased investor confidence.
Pressure on the foreign exchange market had intensified over Tuesday and Wednesday as the Naira experienced its lowest points across various market segments due to robust demand following the Central Bank of Nigeria’s move toward a unified exchange rate. The recent restoration of access to FX for 43 previously prohibited items is seen as a significant step towards achieving a single exchange rate.
Last week’s sharp depreciation of the Naira to N848.12 per dollar in the Investors’ and Exporters’ forex window marked a historic low, setting a new benchmark for market observers since the window’s establishment in 2017.
