The Naira, Nigeria’s official currency, yesterday recorded a sharp decline in the parallel market, dropping to N1,640 per dollar.
This marks a further depreciation from its previous rate of N1,650 per dollar, which was recorded just a day earlier on Thursday.
This development has raised concerns among economic experts and the public, as the Naira continues to lose value amid increasing demand for foreign currency in the country.
The parallel market, also known as the black market, is where the majority of individuals and businesses obtain foreign currency, especially dollars, due to restrictions in the official market.
The official rate, however, showed a slight appreciation.
According to data from the Financial Market Dealers Quotations (FMDQ), the indicative exchange rate in the Nigerian Autonomous Foreign Exchange Market (NAFEM) improved slightly, moving from N1,544.02 per dollar on Thursday to N1,541.52 per dollar yesterday.
This represents a N2.50 appreciation in the official rate.
Despite this, the gap between the parallel market and the official market rates remains concerning.
The difference narrowed to N98.48 per dollar yesterday, down from N105.98 per dollar on Thursday.
This narrowing gap reflects some adjustment, but the overall depreciation of the Naira continues to be a major challenge for the economy.
Another factor contributing to the Naira’s struggles is the decline in the volume of dollars traded in the official market.
FMDQ data shows that dollar turnover in the market dropped sharply, falling by 117.7% yesterday.
A total of $190.57 million was traded, compared to the $87.51 million traded on Thursday.
This significant drop in dollar supply in the official market highlights the challenges in meeting the high demand for foreign exchange.
As dollar supply decreases, the pressure on the Naira intensifies, causing further depreciation.
The scarcity of dollars has been an ongoing issue in Nigeria, as the country struggles with reduced foreign reserves and lower export earnings, particularly from crude oil sales.
Economic analysts are expressing concern over the continuous depreciation of the Naira and the growing pressure on Nigeria’s foreign exchange market.
Many warn that the current situation could lead to more inflation, higher prices for goods, and increased economic hardship for the average Nigerian.
“The sharp fall in the value of the Naira is alarming,” said Adeolu Adebayo, a Lagos-based financial analyst.
“Every time the Naira weakens, it means the cost of imports goes up. This puts more pressure on businesses and consumers. Prices will continue to rise.”
Nigeria relies heavily on imports for many essential goods, including food, fuel, and machinery.
As the value of the Naira declines, the cost of importing these items increases, further driving inflation.
Adebayo explained that the current exchange rate crisis is being fueled by several factors.
“There’s a shortage of foreign exchange in the system, coupled with high demand from both businesses and individuals,” he said.
“This mismatch is pushing the exchange rate higher. Unfortunately, the measures in place so far have not been enough to stabilize the Naira.”
The Central Bank of Nigeria (CBN) has implemented several policies aimed at managing the exchange rate crisis, but these efforts have had limited success so far.
One of the strategies the CBN has employed is limiting access to dollars for certain imports and encouraging the use of local alternatives.
Additionally, the CBN has introduced tighter foreign exchange controls in a bid to reduce demand for dollars and stabilize the Naira.
Despite these interventions, the parallel market continues to flourish, and the disparity between the official and unofficial rates persists.
Experts believe that unless there is a significant improvement in Nigeria’s foreign exchange earnings, especially from oil exports, the pressure on the Naira will continue.
“The issue is that Nigeria is not earning enough dollars to meet the high demand,” said economic consultant Grace Emeka.
“Nigeria’s foreign reserves have been falling, and this makes it difficult for the central bank to intervene in the market and provide stability.”
As of the last report, Nigeria’s foreign reserves stood at approximately $33 billion, down from $37 billion at the beginning of the year.
This depletion of reserves is a major concern, as it limits the country’s ability to defend the Naira and meet dollar demand for imports.
The continuous depreciation of the Naira is having a direct impact on the lives of Nigerians.
Many Nigerians are already feeling the pinch of higher prices for everyday goods, as inflation rises.
The National Bureau of Statistics (NBS) recently reported that Nigeria’s inflation rate had risen to 25.8%, the highest in nearly two decades.
For many Nigerians, the rising cost of living is becoming unbearable.
“The prices of everything have gone up,” said Grace Okojie, a trader in Benin City.
“Food is more expensive, transport is more expensive, and school fees have gone up. Every day it gets worse, and the dollar keeps going up.”
Business owners are also struggling, as they have to pay more for imported materials and equipment, squeezing their profit margins.
Some small businesses have had to shut down or lay off workers due to the high cost of production.
There are growing calls for the government to take more decisive action to address the Naira’s depreciation and ease the economic challenges facing Nigerians.
Some economists argue that Nigeria needs to diversify its economy away from dependence on oil and focus on boosting non-oil exports to earn more foreign exchange.
“Oil alone cannot sustain the Nigerian economy,” said Professor Bala Abdullahi, an economist at Ahmadu Bello University.
“We need to focus on sectors like agriculture, manufacturing, and technology to generate more revenue and reduce our dependence on imports.”
In the meantime, Nigerians are hoping for a more stable exchange rate and a stronger Naira, as the current situation threatens to push more people into poverty.
With the Naira now trading at N1,640 per dollar in the parallel market, and the official rate showing only minor improvements, the outlook for the currency remains uncertain.
The continued depreciation of the Naira in both the parallel and official markets is causing concern across the country.
As the gap between the parallel and official rates narrows, it is clear that the pressure on the Naira is not easing.
The drop in dollar supply and high demand for foreign exchange are compounding the situation, and experts warn that the economic impact will be severe if the Naira continues to weaken.
