The Naira appreciated to ₦1,600 per dollar in the parallel market on Thursday, August 22, marking an improvement from ₦1,615 per dollar recorded just a day earlier.
This appreciation provides a temporary relief for those dealing with foreign exchange on the black market.
However, the situation is more complex in the official Nigerian Autonomous Foreign Exchange Market (NAFEM), where the Naira depreciated, raising concerns about the currency’s long-term stability.
The Naira has experienced significant fluctuations in recent years, reflecting the broader economic challenges facing the country.
The exchange rate is a critical indicator of economic health, affecting everything from the price of imports to the level of foreign investment in the country.
Nigeria operates a dual exchange rate system, with an official rate set by the Central Bank of Nigeria (CBN) and a parallel market rate, which is determined by supply and demand in the black market.
The parallel market rate often diverges significantly from the official rate, leading to challenges in managing the country’s monetary policy.
On Thursday, August 22, the Naira appreciated in the parallel market, trading at ₦1,600 per dollar, up from ₦1,615 the previous day.
This gain is notable given the persistent depreciation the currency has faced in recent times.
However, the official NAFEM told a different story, where the Naira weakened, trading at ₦1,586.11 per dollar, down from ₦1,543.84 the previous day—a loss of ₦42.27.
The recent data from FMDQ, a Nigerian financial markets data repository, provides further insight into the challenges facing the official exchange rate.
The volume of dollars traded in NAFEM plummeted by 30 percent, with only $120.2 million traded compared to $171.79 million the previous day.
This decline in turnover indicates a reduced availability of dollars in the official market, which can contribute to the Naira’s depreciation.
One significant outcome of the recent fluctuations is the narrowing of the gap between the parallel market and the official exchange rate.
The difference between the two rates dropped to ₦13.89 per dollar from a previous ₦71.16 per dollar.
This narrowing suggests that the Naira’s value is becoming more aligned across different markets, which could be a sign of either a stabilising currency or an impending adjustment in the official rate.
However, this narrowing gap could also indicate a convergence caused by increased pressure on the official rate to reflect the realities of the parallel market
