The volatility of Nigeria’s foreign exchange market seems to be heading towards the 2015 crisis era as the naira has further depreciated to N450 to a dollar in the parallel market on Friday, April 24, 2020.
According to Aboki fx, this represents a 4.6% depreciation when compared to N430 to a dollar that it sold the previous day.
The liquidity crisis in the foreign exchange market seems to be getting worse as the price at which the dealers buy the dollar has moved from N412 to a dollar to N428 to a dollar within the last 3 days.
However, the pounds sterling appears to still be stable at N500 to one pound as at the time of this report.
The huge crash in crude oil prices globally has caused a serious liquidity crisis in the foreign exchange market as about 90% of Nigeria’s foreign exchange earnings and about 70% of the country’s revenue is from oil.
This has put further pressure on the country’s external reserves as it has depleted to about $33.8 billion as of April 22, 2020.
The demand for the dollar far outweighs the supply as importers and speculators struggle for the little that is in circulation. Even the liquidity crisis is affecting the foreign investors, who are trapped in Nigeria’s debt market after selling their local currency securities in March. They are unable to get dollars to repatriate their proceeds.
This situation is further compounded by the suspension of sales of dollars to Bureau De Change (BDCs) operators.