The exchange rate between the Nigerian Naira and the US Dollar experienced one of its most challenging weeks in recent history, both on the official NAFEM (Nigerian Autonomous Foreign Exchange Market) and the parallel market.
At the week’s close, rates stood at N808/$1 on the official market and N1170/$1 on the black market. This represents a significant 5.4% decline on the official NAFEM window, marking one of the lowest points ever recorded at the end of a week in Nigeria’s exchange rate history.
The last time the exchange rate closed the week above N800 was on July 14th when it settled at N803.90, according to Nairametrics data.
A Weaker Naira Across All Markets:
The exchange rate hit a record weak closing day rate of N848.12 on October 17th, 2023, and reached an “intra-day high” of N999 during the week, reflecting a shift towards the prevailing street rates.
In the parallel markets, where unofficial exchange occurs, quotes fluctuated between approximately N1,040 and N1,175/$1, with some transactions quoting as high as N1,200/$1. This marks a striking 10% depreciation within a single week, a pattern last observed around November 2022 during a period of intense volatility.
The general trend of depreciation across markets suggests that a stabilization in the exchange rate is not in view, at least not until there is an improvement in supply.
Forex Scarcity and Speculation:
Reports from numerous black market operators indicate a continued scarcity of forex on the streets, with many traders voicing concerns about limited to no supply for trading.
Additionally, it is believed that speculation may be a primary factor contributing to the naira’s depreciation, as traders anticipated the repercussions of lifting the ban on 43 items. The Central Bank had previously cited this ban as one of the causes of the substantial disparity between the official and black market rates. This disparity, which began at N289/$1, concluded the week at an astonishing N361.73/$1.
While the total turnover for the entire week amounted to $423.9 million, in contrast to the $646.6 million recorded the previous week, it’s important to note that as of October 19, 2023, the external reserve stood at $33.3 billion.
It’s noteworthy that Nigeria’s external reserve was $35 billion when the Tinubu administration took office on May 29th, 2023. Since then, the exchange rate in the parallel market has plummeted by 36%.
