The exchange rate between the naira and dollar ended one of its worst-ever weeks in recent history for the official NAFEM and Parallel market respectively.
Rates closed at N808/$1 and N1170/$1 on the official and black markets, respectively.
This decline signifies a substantial 5.4% drop on the official NAFEM window, marking the lowest levels recorded at the end of a week in Nigeria’s exchange rate market history.
The last time the exchange rate closed the week above N800 was on July 14th, when it settled at N803.90, according to Nairametrics data.
Weaker naira across all markets
The exchange rate fell to an all-time weak closing day rate of N848.12 on October 17th, 2023, and also hit an “intra-day high” of N999 during the week as the official market moved closer to realities on the street.
- In the parallel markets, where the exchange rate is unofficially traded, quotes ranged from around N1,040 to N1,175/$1, with some transactions quoting as high as N1200/$1.
- This represents a remarkable 10% depreciation within a week, a trend last witnessed around November 2022 during a period of wild volatility.
- The pervasive weakening observed across markets suggests that a bottoming out is not in sight, at least not until there is an improvement in supply.
Reports reaching Nairametrics from several black market operators suggest scarcity of forex persists on the streets with several traders complaining that they had limited to no supply to trade.
- Nairametrics also gathered speculators may also be one of the primary reasons behind the naira’s depreciation, as many traders anticipated the impact of the removal of the ban on 43 items.
- The central bank had cited the ban on 43 items as one of the reasons for the wide disparity between the official and black market rates. The disparity which started at N289/$1 closed the week at a whopping N361.73/$1.
Meanwhile, the total turnover recorded for the entire week amounted to $423.9 million, compared to the $646.6 million recorded the previous week.
- As of October 19, 2023, the external reserve stood at $33.3 billion.
- The external reserves have remained at the $33.3 billion level since September 6th, 2023, indicating that the apex bank has yet to inject the expected supply into the market.
- It’s worth noting that Nigeria’s external reserve was $35 billion when the Tinubu administration took office on May 29th, 2023.
Since then, the exchange rate at the parallel market has plummeted by 36%.
This is a simple supply and demand problem. We import virtually everything, food, medicines, petrol and pay for all these with dollars. The only thing our economy exports is crude oil. Of course dollar rate will always go up because demand outstrips supply, until we figure out how to start producing high value products for exports and cut down on the products we import by producing them locally, nothing we do will have much of an impact on the current situation we found ourselves.