Dollar hits N702/$1 at official market, drops in black market

The exchange rate between the naira and the dollar fell to N702/$1 at the end of the day on Thursday, June 15th, 2023 at the official Investor and Exporter window.

This implies the value of the naira depreciated by 5.74% in the last 24 hours, as the naira to dollar exchange rate closed trading on Wednesday at N664.04/$1.

This is according to data from the FMDQ where the exchange rate is sold officially by traders.

This is also the first full day of trading since the central bank issued new Operational Changes to the Foreign Exchange Market which essentially gave traders the freedom to trade at market-determined prices.

The closing rate for the day was N702.19/$1 after opening trades at N658.5/$. The intra-day high was N791/$1 which means the exchange rate sold at that price during trading. The intra-day low was however N461/$1.

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Meanwhile on the P2P lending website, Binance, cryptocurrency traded bought and sold forex for an average price of N763-N764/$1 compared to

Meanwhile, Nigeria’s inflation rate rose yet again for the month of May to 22.41% from 22.22% in April.

Food inflation continues to be the major driver of inflation rising by 24.82% year on year. Core inflation which strips out the more volatile food inflation also rose to 20.06%.

In a report published on the day, the global investment banking group pointed to rising inflation as a reason why interest rates need to be higher in Nigeria.

Despite applauding the new operational changes to forex, it demanded higher interest rates to mitigate the risk of negative real return when the income is adjusted for inflation.

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They also mentioned that the government will need to clear the forex pent-up demand of $12 billion which is necessary to unify the currency

The new currency regime is in its second day of implementation and market analysts expect further volatility as the market continues its search for price discovery.

More worrisome is the month-on-month inflation for the headline inflation rate which rose sharply by 1.94% higher than the previous record of 1.9%.

Rising inflation is seen as a major contributory factor to currency depreciation. This suggests the exchange rate may continue to depreciate until Nigeria achieves a level of moderate inflation rate.