The exchange rate between the Nigerian naira and the US dollar plummeted to a record low of N803/$1 at the investor and exporter window on Friday, July 15, 2023. This represents the first time the rate has closed above N800/$1 and reflects a 7.3% decline from the start of the week.
Forex turnover at the I&E window also experienced a significant decline, reaching its lowest point since May 2nd, 2023, with only $46.9 million traded. Additionally, the market witnessed an all-time intra-day high of N829/$1, surpassing the parallel market rate.
The parallel market saw a similar decline, with the exchange rate falling to N815/$1. Meanwhile, the country’s forex reserves stood at $34 billion as of July 11th, 2023.
Bureau de Change (BDC) operators voiced concerns about their exclusion from the forex market, noting that their participation is crucial for the success of the new exchange rate policy implemented by the Central Bank of Nigeria (CBN). Manufacturers also reported difficulties accessing forex through official channels, leading to a reliance on the black market.
The supply constraint, combined with increased demand ahead of the holiday season and upcoming school fees payments, is contributing to the pressure on the forex market. Additionally, the low-interest rate environment is seen as a disincentive for foreign investors, who may seek more stable economies for their investments.
According to their chairman, Gwadabe, “The volatility of the naira continues to underpin the slow economic growth of Nigeria. The I&E window is laudable, it’s patriotic and nationalistic, but there is no policy that can actualize its mission without carrying the interest of the subsector (which is the BDCs). The I&E window is supposed to run on three legs, the banks, the CBN and the BDCs, overtly or covertly, the BDCs are missing.’’
