In a notable setback, Nigeria’s official market experienced a significant downturn on Tuesday, with the national currency, the naira, plunging to an unprecedented low against the US dollar.
The situation was exacerbated by thin trading conditions, resulting in sharp fluctuations reminiscent of levels observed in the unofficial parallel market, known for its greater currency flexibility. According to data from the London Stock Exchange Group (LSEG), the naira saw a mid-day plunge to as low as N1,248 against the dollar, following an opening rate of N927 earlier in the day.
Despite the initial decline, the currency exhibited some resilience, bouncing back to N845 later in the trading session.
Olayemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), recently articulated his intention to let market forces play a decisive role in determining exchange rates. He emphasized the imperative of transparent and well-defined regulations governing market operations.
These statements, combined with persistent dollar shortages in the official market, contributed to the gradual convergence of the naira’s official exchange rate towards levels observed in the parallel market.
As of Tuesday, the currency was quoted at approximately N1,225 on the parallel market. In contrast, the one-month non-deliverable forwards market quoted it at N1,002.50, highlighting the intricate dynamics and diverse valuations across different trading platforms, as reported by Reuters.
