LAGOS, Nigeria — The Nigerian naira nosedived to an all-time low of N925/$1 on the parallel market, reflecting the unanticipated aftermath of recent adjustments to the nation’s foreign exchange policies, a stark contrast to the strategies employed during President Muhammadu Buhari’s tenure.
Leading global institutions such as the World Bank, along with domestic financial and economic experts, had previously pointed out the economic disadvantages of sustaining both official and parallel naira rates.
This dual-rate system, they argued, allowed a privileged few to profit significantly by accessing foreign currency at the official Central Bank of Nigeria, CBN, rate and instantly reselling it on the black market.
It was on this backdrop that President Tinubu, during his inauguration speech in May 2023, emphasized the necessity for monetary policy reforms.
He urged the CBN to target a unified exchange rate to channel funds towards tangible investments instead of speculative activities.
Following up on this vision, on June 14, 2023, the CBN eliminated segmented forex windows and granted Deposit Money Banks the freedom to determine naira rates against international currencies, marking a significant departure from the bank’s past interventions.
However, this newfound freedom has seemingly backfired, with the naira experiencing an unrelenting decline on the parallel market.
Forex traders in Nigeria’s capital, Abuja, quoted a staggering N915/$1 rate for cash trades on Thursday, August 9, 2023.
Rates in Lagos, Nigeria’s bustling commercial hub, fluctuated between N880 and N890.
Observations from Murtala Muhammed International Airport and Allen Junction in Lagos highlighted that Bureau De Change operators were buying the dollar at rates as high as N890, reselling it between N900 and N905.
“The dollar has yet to breach the N900 threshold here in Lagos. We’re buying it for N890,” noted Ismail Muhammed, a currency trader at Allen Roundabout.
Meanwhile, in Kano, a significant divergence was observed between the parallel market and the I&E market, with the dollar opening at N919 on Wednesday, August 9, 2023, a striking N169 higher than the I&E market rate.
By midday, the rate had escalated to N925 at Kano’s Wapa Forex Market.
The ongoing volatility and sharp depreciation of the naira underscore policymakers’ challenges in regulating a complex foreign exchange environment and raise concerns over potential economic repercussions in the coming months.
