Naira’s exchange rate margin between official, black markets widen

Following the Oct. 27 announcement by the Central Bank of Nigeria (CBN) that intends to put into circulation newly designed naira banknotes, the local currency’s parallel market exchange rate versus the dollar has slipped by almost 20 per cent.

The CBN’s decision to release the new banknotes as well as to demonetize the current N200, N500, and N1,000-naira banknotes after Jan. 31, 2023, has sparked a rush to buy the greenback.

It was gathered that the shortage of the U.S. dollar on both the official market as well the parallel market has increased pressure on the naira.

From an exchange rate of around N760:$1 at the time of the announcement, the naira had, by Nov. 5, dropped to a new all-time low of N900/$1.

The British Pound also sold for about N1005/£1, while the Euro sold for about N865-N870/$1.

The parallel market rate, according to a cross-section of dealers who claimed to have traded at the weekend, this is more than double the official NAFEX exchange rate of N440/$1 reported by the central bank on its website.

READ ALSO: Naira trades for N900/$1 at parallel market

The rates closed above N870/$1 on Friday, however, several parallel market rates suggest rates depreciated further to as low as N890-N900/$1 if you want to buy from traders.

However, a quick check at peer-to-peer exchanges where dollars are also traded using the cryptocurrency USDT, reveals rates averaged N830/$1 as of Saturday evening while rates ranged between N829-N833.9?$1. Unlike the inflow market where trades can be in millions, the value of trade in this market is typically small with an average trade of about $1,500 per transaction.

According to the Managing Director of Flawless Capital Limited, Andrews Elueni, the Naira’s exchange rate may slip past the N1,000:$1 mark before the end of 2022.

“It will get to N1,000 before the end of the year, the reason being that there is a lot of fraud and corruption in the system,” Elueni reportedly said.

He said despite receiving the backing of President Muhammadu Buhari, the CBN’s currency redesign plans have seemingly failed to halt the naira’s slide.

Despite the naira’s accelerated slide versus the dollar on the parallel market, Nigerian monetary authorities continue to keep the naira pegged at just under N450 per dollar.