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Nigeria’s legal tender has dipped further to a four-year low in the parallel market after the central bank’s effort to prompt banks to sell more dollars to customers failed to address the widening difference between the official and black-market rates.
Unlicensed dealers were exchanging the naira at 502 per dollar on Wednesday from 500 last week, abokifc.com, a website that collates the data reports.
The development amounted to the lowest exchange rate for the naira since 2017. The rate widens the gap between the official and the parallel market rate to 22% when compared with the spot rate of 411.13 naira in Lagos on Wednesday.
Nigeria, Africa’s biggest economy, has witnessed devaluation of its currency thrice since March last year as lower oil income, which accounts for about 90% of dollar earnings, put pressure on external reserves.
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After a meeting between the Central bank governor, Godwin Emefiele and chief executives of commercial banks last week, the lenders agreed to hike dollar supply and operate special accounts to meet the requirements of business and travellers, according to Osita Nwanisobi, spokesman for the central bank.
The central bank uses lenders to make more foreign currency available to buyers, at around the official rate of between 410 naira to 412 naira to the dollar to reduce pressure on the streets where rates are crashing from excess demand.
Chief executive officer of forwarding Marketing Communications bureau de change, Abubakar Mohammed, told in an interview with SaharaReporters said, “Dollar demand is high; people are buying for storage.”
“There is no effect yet from any increased sales by the banks.”
Naira spot and black market rates widen since devaluation in 2020
The widening gap between the official and parallel rates creates arbitrage opportunities, which the central bank says it’s monitoring closely. The central bank wants customers to report any breach to the regulator, Nwanisobi said, according to a report by Bloomberg.
“The CBN shall continue to monitor market developments and is committed to ensuring an efficient foreign exchange market for all legitimate users,” Nwanisobi said.
Source: SaharaReporters
This post was written by Obiajulu Joel Nwolu.
The views expressed here belong to the author and do not necessarily reflect our views and opinions.