Naira Hits N1000/$1 at Parallel Market
The disparity between the official and parallel market rate is now very much wider than anticipated as the dollar at parallel market, on Tuesday, sold at N1000/$1 at the end of transactions.
According to traders who spoke to Daily Sun, this is quite reminiscent of the former President Muhammadu Buhari, in which the Naira to the dollar exchange rate in the official market stood at N465.51/$1 while the parallel market averaged N763/$1, leaving a gap of more than N297.49 and spiking round-tripping in the FX market.
The Nigerian currency had depreciated by 3.3 per cent at the NFEX window to N773.25/$1 while the parallel market read N995/$1 on Monday. However, Tuesday trading saw pent up demand in the dollar in the parallel market, drove the greenback to $1000/$1. Whereas, the Naira stood at N755.08/$1 at the NFEX window according to data obtained from abokifx and FMDQ ‘s website.
This means that the rates have gone from converging to creating a gap of N219.75 — N68.88 shy of the N288.63 gap recorded a day before the CBN devalued the naira in June.
Furthermore, this development has led to many economic analysts questioning the reform policies spearheaded by President Bola Tinubu and the Central Bank of Nigeria (CBN).
Tinubu, had during his inauguration speech, said he was going to reform the policies in the forex market, adding that CBN would undergo a “thorough house-cleaning” process and unify the exchange rate in order to reduce the disparity between the official and parallel market rate.
The CBN in return, announced the suspension of the RT200 FX programme – an initiative targeted at raising $200 billion in FX earnings from non-oil proceeds and Naira4dollar scheme – both at which incentivised remittances to ensure the inflow of FX.
On the back of these announcements, the dollar rate which stood at N471.67 rose to N664.04/76 at the official market while at it rose to N760/$1 from N755/$1 at the parallel market.
Specifically on June 21, 2023, Naira’s official and parallel rates converged after days of volatility sparked by the CBN’s move to allow the market freely determine the price of Nigeria’s currency.
However, gains from the policy change have been lost in the last three months. Worse still, FX backlogs remain owing to the scarcity of FX. Reacting to the development, the Managing Director, APT Securities, Kurfi Garba, noted that the current situation regarding scarcity of FX continues to fuel FX speculations, which has in turn caused the widened disparity in the official and parallel market rates.
“I think this disparity is due to the traders speculating are reasons for this disparity. If you go to the banks, they do not have the dollar and so when this happens, you see the traders on the street taking advantage of this situation especially to those individuals or businesses in dire need of FX”, he explained.
For his part, the Chief Executive Officer, Nigerian Exchange Limited (NGX), Temi Popoola, stated that the current development presents an ample opportunity for the government to look at dollar denominated listings on the Exchange.
According to him, disbursing dividends dollars for those companies who earn and report their profit in FX, could potentially address the challenges posed by fluctuations in FX.
