The naira, the Nigerian currency, traded at N955 to a U.S. dollar on Thursday, according to data captured by newsmen.
This new rate of N955 to the greenback represents a significant drop in the value of the Nigerian currency, which opened trading in the black market on Monday at N890 to a dollar.
The currency is just N45 away from hitting the N1,000-to-dollar prediction that many macroeconomic analysts had predicted when President Bola Tinubu floated the currency.
Floating the currency is to reduce the gap between the official Importers & Exporters window and the parallel market rate, to the point where the unofficial exchange rate will tilt closer to the official market rate, as the president stated.
Unfortunately, the shortage of supply of the dollar has greatly hindered the ability of the Central Bank of Nigeria (CBN) to intercede in the market, thereby pushing the most legitimate demands to the black market. A situation that has exerted so much pressure on the Bureau de Change (BDC), which controls almost 95 percent of the transactions in the parallel market.
Manufacturers have been badly hit as the cost of production and business planning have been negatively impacted by this erratic change.
PricewaterhouseCoopers (PwC) had predicted in its “Nigeria Economic Outlook for August 2023” report that the month of August will experience much volatility in its FX market. In essence, that means the naira will not be stable as its price in the international FX market will fluctuate so much.
The impact is already being felt on Nigerians, as not only has the price of gas increased, but oil marketers have warned ahead of an increase in the pump price of fuel that sells way above N600 per litre in most parts of the country.
Apparently, the CBN is optimistic about a turn-around in the FX situation in the country, as it reported an inflow of $1.41 billion for the month of June only. A figure that most likely would have risen in the month of July following savings from the expensive fuel subsidy removal and increased crude oil exports.
Wale Edun, who many expect to become the next Finance Minister, has promised that the Tinubu government is working tirelessly to address these challenges. Edun had lampooned the current situation in the parallel market, admitting that the country didn’t have any business being in the ocean of an unstable FX market, as according to him, “for a country that has revenue flows from oil revenues, from remittances, from other non-oil exports, and from the financing of over $100 billion a year, there is no reason that there should not be a stable exchange rate.”
He also admitted that what is currently happening is “not backed up the fundamentals of the Nigerian economy.”