Currency Crisis Deepens as Naira Plummets to N900/$1 on Unofficial Market

In a concerning turn of events, the exchange rate between the Nigerian naira and the US dollar has sharply dropped to N900/$1 on the black market, according to reports from traders on Tuesday.

This marks a significant depreciation from the N840/$1 rate observed late last week, shortly after the central bank had cautioned speculators about the possibility of a decline.

Earlier on Tuesday, rates were hovering around N865-N870/$1; however, the evening witnessed a rapid decline, indicating a surge in demand amid ongoing supply challenges.

The situation has fueled apprehension among investors, with memories of mid-August when the dollar reached as high as N955/$1, sparking concerns that it might escalate further to N1000/$1.

Responding to the alarming situation, the administration under Tinubu’s leadership expressed its firm commitment to address the currency’s rapid devaluation, with support from the central bank’s intervention efforts.

To mitigate the supply-demand imbalance, the government revealed that the Nigerian National Petroleum Corporation (NNPC) had successfully secured a $3.5 billion loan aimed at bolstering supply amidst the mounting demand pressures.

These measures have instilled some confidence in the local currency’s stability, potentially leading to a reduction in the black market premium over the official Investors and Exporters (I&E) Window, a development welcomed by the market.

However, recent insights from JP Morgan unveiled that by December 2022, Nigeria’s central bank held net reserves of approximately $3.7 billion, causing a stir among analysts. The exact underlying cause of the naira’s persistent depreciation remains elusive.

Market operators have speculated that the downward slide of the currency can be attributed to intensifying demand pressures. One operator, who wished to be identified only as “Musa,” proposed that the brief appreciation seen earlier in the week was triggered by speculator concerns about potential currency appreciation.

Musa emphasized that authentic demand remains unmet due to unresolved supply challenges, shedding light on the complex dynamics driving the currency’s decline.

“We have heard so much from the government but we are yet to see the dollar. Maybe when it starts to flow the exchange rate will be stronger” Musa stated.

Adding another layer, Nigeria’s central bank declared its intentions to reincorporate BDC operators into the forex market, guided by a revamped set of protocols.

In related news, trading on the official I&E window on August 22 witnessed the exchange rate between the naira and the dollar settling at N770/$1, a drop from N761.32 the previous day.

The intra-day high soared to N799.9/$1, whereas the intra-day low dipped to N720/$1. Market activity for the day registered a turnover of $122 million.

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