Exchange rate hits N685/$1 at peer-to-peer (P2P) forex market

The exchange rate between the naira and the US dollar has fallen to a record low at N685.5/$1 at the peer-to-peer (P2P) forex market, findings from cryptocurrency P2P exchange market shows.

The dollar which was traded at N667/$1 yesterday has now fallen further by 2.8% to N685.5/$1, as demand for foreign exchange remains elevated amidst sustained scarcity.

The P2P market often traded in small volumes and the unit of exchange is the cryptocurrency USDT, which is a stablecoin that trades 1:1 with the dollar.

Similarly, Bureau De Change operators sold forex at N665/$1 on Tuesday, indicating continuous nosediving of the local currency.

Meanwhile, in a conversation with a BDC operator at the Lagos International Airport, he stated that he sells dollars for N675/$1, while he buys from customers at the rate of N665/$1, indicating a N10 margin on every dollar.

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Exchange rate for “inflows”, a term for dollar transfers from a foreign country into Nigeria or in another account in exchange for naira locally, ranges from between N665-680 from some of the checks we conducted.

While the exchange rate is experiencing huge volatility and disparity at the unofficial markets, the Investors and Exporters window, where forex is traded official has also seen some level of a downtrend in recent weeks, albeit controlled.

Some BDC operators have blamed the volatility in the parallel market on the fragmented and disorganized state of the market. Some have also blamed it only for a significant rise in demand as a result of panic buying.

The nation’s external reserve has also resumed downward movement after 27 days of consecutive appreciations. However, in the past one week, the external reserve has lost $138.7 million, after five consecutive days of decline.

READ ALSO: Naira weakens further against Dollar at parallel market

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The decline in the external reserve could be largely attributed to the intervention by the apex bank in the I&E window. Recall that Nigeria practices a managed floating exchange rate system, which allows the Central Bank to intervene regularly in the foreign exchange market to change the direction of the currency’s float.

In the previous week, a total of $840.5 million was traded in the market, a significant improvement compared to $211.98 million and over $400 million traded in the preceding two weeks. The improved liquidity came after the exchange rate fell to N430/$1, after which a sum of $383 million was injected into the market.

However, the rate has fallen to a year-to-date record of N431/$1 after daily forex turnover slumped to $58 million.