“The Naira reaches an unprecedented low of ₦915 per dollar in the informal market.”

“On Wednesday, the Nigerian naira experienced a further decline, reaching a historic low of N915 per dollar on the parallel market, causing the divergence between official and unofficial exchange rates to reappear.

The currency of Africa’s largest economy has faced increased pressure ever since the Central Bank of Nigeria (CBN) introduced a floating currency system in June. According to data from FMDQ, the naira began the day at N757 per dollar in the official market, but its value weakened significantly to N915 per dollar on the black market, as reported by Aboki FX.

This discrepancy has led to a N158 gap between the two rates, marking the widest difference since the central bank adopted a more flexible exchange rate mechanism to encourage capital inflows.

Ayo Teriba, CEO of Economic Associates (EA), has suggested that to narrow the disparity between these rates, the CBN should grant Bureau De Change operators (BDCs) the same access as banks to promote healthy competition. Additionally, Teriba urged the CBN to reconsider its list of 43 items ineligible for forex, suggesting that making these items eligible could contribute to rate unification. Teriba stated, ‘For a truly unified rate, the CBN needs to permit BDCs equal access alongside banks, and the list of 43 previously deemed ineligible for forex should be revised to qualify for unification.'”

“He emphasized the need to reconsider reintroducing the list of 43 forex items into the official market.

“This practice diverts transactions to an alternate ‘window,’ resulting in a different rate prevailing. We must decide whether to truly pursue exchange rate unification or continue to undemocratically exclude legitimate participants and transactions, perpetuating the existence of multiple rates,” Teriba stated.

The primary objective of foreign exchange unification was to simplify the system and enhance the influx of dollars. This action led to a 40 percent reduction in the official exchange rate, briefly aligning it with the rate seen in the black market. However, due to the persisting mismatch between the supply and demand for dollars, the disparity has progressively widened.

Ibrahim Tajudeen, the chief economist at ChapelHill Denham, attributed the depreciation and the gap between both rates to a scarcity of liquidity in the market.

“When there’s insufficient liquidity and demand is on the rise, a gap is bound to emerge,” he explained.

Tajudeen further stated, “I believe the situation could worsen, particularly when schools reopen and people need to pay foreign school fees.”

He pointed out that the current value of the naira on the parallel market is not supported by economic fundamentals, and the solution lies in bolstering inflows.

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