Naira in Forex Crises
The exchange rate between the Nigerian naira and the US dollar has taken a nosedive, reaching a historic low of N983/$1 in the black market.
This startling development comes on the heels of reports from currency traders who have declared a severe shortage of available dollars.
This drastic depreciation represents a 2.93% decline compared to the previous day when the exchange rate stood at N955/$1. The ongoing foreign exchange crisis in Nigeria appears to be worsening, with no respite in sight.
Notably, just last week, the naira traded at N950/$1, showcasing a significant loss in value. Despite the Central Bank of Nigeria’s efforts and numerous policy announcements, the forex market remains highly unstable.
Earlier in mid-August, concerns were raised when the dollar was quoted as low as N955/$1, fueling worries that it might breach the N1000/$1 mark. At one point, the rate briefly improved to N840/$1 after the central bank issued warnings to speculators about potential losses due to upcoming policy changes.
However, a high-ranking official from the Association of Bureau De Change Operators of Nigeria (ABCON) voiced the current grim situation, explaining that the forex market is in disarray. Many licensed operators find themselves without dollars to buy or sell, rendering them effectively out of business.
He lamented, “The market has disintegrated, and the rate now stands at N983/$1. Most licensed bureau de change operators are unable to secure dollars, leaving us in dire straits. It seems liquidity is concentrated in the parallel market, driven by scarcity, which naturally leads to the emergence of a black market.”
This dire situation has created confusion even among licensed bureau de change operators who, if given the opportunity to transact, are uncertain about the best course of action.
Furthermore, the official noted that the forex market has become increasingly complex, with multiple rates emerging, including those from platforms like Binance and Dubai, in addition to the local parallel market rate.
The disparity in rates underscores the challenges faced by market participants at various levels.