Naira hoarders drive exchange rate haywire at FX black market

The deadline issued by the Central Bank of Nigeria (CBN) for the withdrawal of old Naira notes as it plans to reintroduce newly designed Naira notes may be responsible for depreciation of the Naira which hits N800/$1 at the parallel market.

While the official exchange rate seems to be relatively stable, a dollar is currently sold for an average of N790 to N800, while the black market traders are buying at a rate of N780 to N790/$1.

National Daily gathered from sources that the disparate exchange rate frenzy in the market is caused by naira hoarders who are moving quickly to convert their naira stashed outside banks to dollars ahead of the deadline date.

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The local Nigerian currency is currently under high selling pressure in the black market following CBN’s announcement that the newly redesigned naira notes would start circulating in the economy from December 15, 2022.

Since the apex bank made this announcement last week, the naira has fallen from its initial record low of N765/$1, losing over N30 in three days, piling more pressure on an already depreciating currency.

The naira has lost over 28% between January and October 2022 due to increased demand for the dollar amidst sustained dollar scarcity. The naira started the year at N565 to a dollar.

The exchange rate at the Investors and Exporters window, where FX is traded officially, has also seen some systematic devaluations so far this year, moving from an average of N416/$1 last year to as high as N444/$1 as FX supply continues to dwindle in recent times.

The sum of $362.7 million was traded at the official FX market last week, marking a decline from $425.3 million recorded in the previous week. This is even significantly lower than the average of $500 and $1 billion weekly trades recorded sometime earlier in the year.