Uncertainties among traders as exchange rate goes haywire

The persistent depreciation in the value of the Naira against the US dollar on the black market has further escalated the level of uncertainties among traders, as operators find it hard to determine what the actual exchange rate is.

The sustained FX scarcity in the country has seen the naira lose ground against the US dollar despite interest rate hike by the Central Bank of Nigeria.

This is coupled with increased demands, as many seek to hedge against the rising inflation rate by saving in foreign currency.

Naira fell against the U.S. dollar at both the official and unofficial markets on Wednesday, slipping to a record low at the unauthorised market amidst continuing scarcity and high demand of the greenback.

Naira which commenced trading at N440.58 per $1 at the spot market declined to N441.67 per dollar at the close of sales, data published on FMDQ websites, where forex is officially traded, showed.

Similarly, the local unit crashed significantly at the street market on Tuesday, October 25, 2022, parallel market exchange rates reviewed across states showed.

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The local currency opened at N762.00 per $1 at the parallel market otherwise known as the black market on Wednesday, October 26, 2022, in Lagos Nigeria, after it closed at N757.00 per $1 on Tuesday 25, October 2022.

On the other hand, the naira at the cryptocurrency peer-to-peer FX market appreciated by 0.76 per cent to trade at a minimum of N756.3/$1 on Wednesday morning, as against N762.1/$1 that it traded at the same time on Tuesday, 25th October 2022.

According to Mallam Abubakar, he currently sells dollars for a minimum of N761/$1 and would buy at the rate of N757/$1.

Despite this disparity, a common issue ravaging the market is the scarcity of the greenback.

The official exchange rate, which is more regulated by the apex bank has also depreciated against the US dollar year to date, closing at N441.67/$1 compared to an average of N416/$1 recorded in the previous year.

This is a result of the shortage of FX supply in the market, considering dwindling inflows, and lack of remittances from the NNPC amongst other factors that have left the CBN short on FX to intervene in the market.

The nation’s external reserve has also lost about $2.8 billion between January and to date, as the Central Bank continues to intervene in the Investors and Exporters window.