Due to increased demand for the dollar on the black market, also known as the parallel market, the naira on Friday dropped to its lowest level ever, falling to N720 per $1.
Following Friday’s trading, the local currency was worth N714 per dollar, down 0.83 percent from Thursday.
From N565 per dollar at the start of the year, the naira has lost 21.53 percent of its value at the current rate.
At the close of business on Friday, a trader told journalists that the exchange rate had however moderated to N716 per dollar.
According to Bismarck Rewane, managing director and chief executive officer of Financial Derivatives Company Limited, the naira is likely to strengthen on the black market toward N670/$ or N680/$ in October 2022.
The parallel market, according to Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN), is referred to as “a tainted market in Nigeria, where people desire to deal in illegal foreign exchange (FX) transactions, including sourcing of FX cash for purposes of offering bribes, corruption.”
Analysts however says factors contributing to Nigeria’s currency’s free fall include a rising strong dollar, import demand, oil theft, fuel subsidies, currency speculation, a record-high money supply, and low productivity.
In the face of rising demand for foreign exchange for both goods and services by Nigerians, the CBN has advised Nigerians to resist the urge of succumbing to the speculative activities of some players in the foreign exchange market.
At the Investors and Exporters (I&E) forex window, also known as the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX), naira appreciated marginally by 0.04 percent as the dollar was quoted at N436.33/$ on Friday as against N436.50/$ quoted on the previous day, data obtained from the FMDQ indicated.
Most currency dealers who participated at the foreign exchange auction on Friday maintained bids between N425.00 (low) and N438.00 (high) per dollar.
The daily foreign exchange market turnover increased marginally by 4.29 percent to $106.11 million on Friday from $101.74 million recorded on Thursday, the data indicated.
Nigeria has a multiple exchange rate system, resulting in persistent currency pressures due to a distorted market structure, Rewane said.
He noted that dollar shortages remain the principal challenge, undermining the performance of the non-oil sector, Nigeria’s exports still largely dominated by oil and oil-related products.
Rewane said the CBN is likely to allow an adjustment at the I&E window towards N440/$ and that the CBN will increase forex supply at the window.
On July 27, 2022, the CBN stopped foreign exchange sales to the Bureau De Change (BDC) and channelled the sale of dollars to commercial banks for legitimate needs.
Naira has depreciated by 25 percent at the parallel market known popularly called black market, one year after the Central Bank shutdown the abokifx platform.