As a new Nigerian president is sworn in today in Abuja, higher demand for the US dollar has forced a further slump of the Nigerian currency in the foreign exchange market.
As at Friday, the naira got as low as N632 to one US dollar at the official rate, a level seen as the worst in recent times. This discouraging trend was said to have been triggered by higher demand for the dollar. It is somehow linked to the imminent inauguration of a new government in Nigeria that seemed to raise the need to travel or do international transactions.
The figure is the highest intraday rate ever recorded since the introduction of the window in April 2017. The I&E foreign exchange (FX) window is the country’s official exchange rate window. It is the market trading segment for investors, exporters, and end-users that allows for FX trades to be made at exchange rates determined based on prevailing market circumstances.
Data from FMDQ OTC Securities Exchange, a platform where FX is officially traded, showed that the opening sale price for Friday was N463.75/$, but it declined by 0.18 percent to close at N464.51/$. The highest spot rate for the day was N632/$ while the lowest was N410/$.
At the end of the trading day, the market recorded a total of $144.72 million in transactions. Meanwhile, checks by TheCable showed that the exchange rate between the naira and the US dollar depreciated to N775/$ at the parallel market on Friday.
A currency trader in Victoria Island, Lagos, who spoke to TheCable, attributed the depreciation of the local currency to a high level of demand for the greenback compared to supply. Currently, Nigeria operates two FX markets: one is the official rate, while the other is the parallel/street market rate.
Although the parallel segment is more accessible to traders and businesses who need FX, the Central Bank of Nigeria (CBN) has consistently maintained that it represents less than one percent of forex transactions and should never be used to determine the exchange rate.
Source: TheCable
