Naira crashes as currency uncertainty worsens

The exchange rate at the parallel market fell to another new 3-year low closing at N470/$1 on Wednesdmn mn k l forex turnover rose by 44.9% and exchange rate at the officially recognized MAFEX market also depreciated, closing at N386.50/$1.

At the black market where forex is traded unofficially, the Naira depreciated by N5 to a dollar to close at N470 to a dollar on Wednesday, according to information from Aboki FX a prominent FX tracking website. This is against the N465 that it exchanged on Tuesday.

The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N386.50/$1, compared with the N386 that was reported on Tuesday, July 14. The opening indicative rate was N387.75 to a dollar on Wednesday.

This represents a 17 kobo gain when compared to the N387.92 to a dollar that was recorded on Tuesday.

According to the data, forex turnover rose from $12.91 million on Tuesday, July 14, 2020, to $18.71 million on Wednesday, July 15, 2020. Although there was an improvement, the low turnover reaffirms the scarcity of dollars and an indication of the liquidity pressure in the foreign exchange market.

This also is a far cry from an average of $200 million recorded at major trading days during the last few weeks.

The low forex turnover can be attributed to tightened liquidity caused by low foreign exchange inflow and economic uncertainties amid the coronavirus pandemic.

Although the Central Bank of Nigeria has been trying to intervene in the foreign exchange market in order to support the naira, the low foreign exchange earnings due to crash in crude oil prices have been a limiting factor.

The country has been under pressure from the International Monetary Fund and the World Bank for currency reforms.