The Central Bank of Nigeria’s (CBN) efforts to unify the official and parallel foreign exchange (FX) market rates appear to be faltering, as the gap between the official rate and the black market has widened significantly. The official rate and the parallel market rate are now separated by over N200, raising concerns about a growing disconnect between the CBN-controlled official market and the informal black market, where most retail transactions take place.
As of Wednesday, the official rate closed at about N1,545 to the dollar, a decline of 1.31% from the previous day’s N1,525. Meanwhile, the black market rate, as reported by Bureau de Change (BDC) operators, stood at N1,750, a sharp rise from N1,625 the previous day. The widening gap between these two rates suggests that the unification process, which aimed to stabilize and align the markets, may not be achieving its desired effect.
The parallel market has seen significant volatility, with the naira-to-dollar rate fluctuating between N1,725 and N1,745 on peer-to-peer (P2P) exchanges. Platforms such as Trove and Bamboo quoted rates of around N1,730 and N1,736, respectively. This marks the first depreciation of the naira in the black market since the introduction of the Electronic Foreign Exchange Matching System (EFEMS) by the CBN, which was designed to promote transparency in FX transactions.
Several factors are contributing to the ongoing depreciation of the naira, particularly a strong demand for dollars from individuals traveling for business, education, and to hedge against the naira’s decline. Speculators are also playing a significant role, maintaining positions in the face of the CBN’s efforts to stabilize the market.
This growing disparity between the official and black-market rates is concerning, as the black market continues to handle a significant portion of Nigeria’s foreign exchange transactions, particularly in retail sectors. Despite the recent increase in Nigeria’s external reserves and an uptick in crude oil production, the forex market remains highly volatile.
Meanwhile, the U.S. dollar strengthened amid the release of new inflation data, which showed a rise in U.S. consumer prices in November. The data has fueled expectations of sustained interest rate hikes by the Federal Reserve, further contributing to the global strength of the U.S. dollar.
