Black market FX traders have expressed their frustration over the recent cash scarcity crisis across the country which has forced many traders to shut down their trading activities.
The FX market traders, who spoke to Nairametrics, said they have ceased trading FX since last week due to the lack of cash and the efficiencies in other forms of transactions. Unfortunately, this development has crippled liquidity in the and significantly impacted businesses.
As you may know, the Nigerian economy has been grappling with the lack of physical cash since January 2023. This followed the decision of the Central Bank of Nigeria (CBN) to phase out old naira notes from the economy and limit the amount of cash in the system.
CBN mopping currency from the system: The CBN according to recent data, mopped up N1.6 trillion from the currency in circulation in January, bringing the amount of physical cash in the economy to N1.39 trillion, while cash in the hands of the public was reduced to N788.92 billion in January from N2.56 trillion recorded as of the previous month.
- Consequently, Nigerians have been left with the pain of a cash hunt, which has destroyed some bank properties. Meanwhile, alternative forms of transactions like mobile banking, internet banking, and other transfer mechanisms have been ineffective, especially in recent times.
- Due to the huge volume of transactions now carried out in banking apps, the mobile applications have suffered several recurrent downtimes, with notable and frustrating reports of unsuccessful debited transactions, others have also used this opportunity to scam unsuspecting Nigerians using fake alerts.
Black market traders feeling the brunt: FX traders have also not been excluded from the effect of the cash drought in the country, as businesses in recent times have dwindled and are almost at a complete halt.
- According to Alhaji Musa, who spoke to Nairametrics, a customer had transferred N500,000 to him last week, and he is yet to receive the funds, despite seeing evidence of debit on the payer’s end.
- They have also complained of severe network problems, which coupled with the banking app downtime has frustrated business activities.
- In the same vein, Muritala noted that the lack of cash has limited their ability to source for FX, as customers with greenbacks also insist on getting cash for their dollars, which they do not have.
Price discrimination: Over the past week, the traders in the parallel market have adopted varying prices, with a preference for cash transactions, while those who prefer to transfer paid higher rates.
- Despite the price discrimination, FX patronisers have maintained their preference for transfers, since they do not have physical cash, to begin with.
- As of the last report, Nairametrics reported that the exchange rate between the naira and the US dollar traded for an average of N762/$1 at the black market on Wednesday, 22nd February 2023, compared to an average of N755/$1 recorded in the previous week.
- Meanwhile, the exchange rate at the official Investors and Exporters window has remained stable at N461/$1 in the past month, with an upper limit of N462.17/$1.
