The exchange rate between the Nigerian naira and the US dollar has reached a historic low of N895/$1 on the black market. A survey of major foreign currency traders in Nigeria reveals that the demand for the greenback remains high despite shortages in supply.
On the peer-to-peer (P2P) market, the exchange rate also soared, with buyers and sellers relying on cryptocurrency to close trades quoting rates as high as N883/$1.
In contrast, on the official Investors’ and Exporters’ (I&E) window, the exchange rate closed at N775/$1 on Thursday.
The significant disparity between the official and parallel market rates has now widened to N120/$1 within a few months since the announcement of the exchange rate unification.
Challenges in supply continue to impact the forex market and exchange rate stability, leading to the widening gap between the official and parallel market rates. This discrepancy was one of the key factors prompting the introduction of the revised foreign exchange market, which aimed to ease foreign exchange controls in mid-June to simplify the monetary regime.
However, this move has contributed to increased volatility in the black market, driven by strong demand from various sectors, including manufacturers, importers, students, and travelers. The Nigerian economy’s import-heavy nature further amplifies the demand pressure in the black market.
The vulnerability of the naira is also attributed to currency speculators, intermediaries, weak oil receipts, and foreign trade deficits, exacerbating the currency’s precarious situation.