The exchange rate between the Nigerian naira and the US dollar has plunged to N1040 in the parallel market due to persistently high demand outstripping supply. Forex traders have reported quotes ranging from N1035 to N1045 per dollar, underscoring the heightened scarcity in the unofficial exchange market, as reported by Nairametrics.
Meanwhile, the official exchange rate remains at N776.8 per US dollar, highlighting the significant disparity between the official and parallel markets, which the Nigerian populace is grappling with.
The parallel market previously breached the N1000 per US dollar benchmark in September, initially believed to be a temporary situation. However, the government's struggle to attract sufficient forex inflows has caused the exchange rate to deteriorate steadily, reaching a new low each week.
On the peer-to-peer market, where cryptocurrencies are used for transactions, buyers and sellers have quoted exchange rates of around N1040 per US dollar. Foreign investment trading platforms, including Bamboo and Trove, have seen exchange rates of about N1022 and N1017 per US dollar, respectively.
The growing disparity between the official and parallel market rates now stands at approximately 26%, or N265 per US dollar. This scenario indicates that if the current official rates persist, the exchange rate will need to depreciate to N1,200 per US dollar to achieve the 38.6% disparity observed before the unification.
The rapid pace at which this disparity is increasing suggests that the continued depreciation of the currency is likely as demand remains high while supply remains limited. A significant buyer of forex noted that the situation has worsened to the extent that purchasing forex, even through official channels, is proving increasingly difficult. Banks are directing customers to fund their accounts, with reports of no availability of dollars at the Investors' and Exporters' (I&E) window, and a cessation of letters of credit issuance.
Furthermore, it has come to light that banks hold approximately $20 billion in foreign currency swaps provided by the central bank and an estimated $8 billion in trapped funds. These revelations highlight the complexities of Nigeria's forex challenges in an environment where the parallel market exchange rate continues to spiral out of control
Source: Nairametrics
