According to Newsone, Nigeria’s currency, the Naira, continued to fall on Tuesday, September 14, reaching an all-time low of N557 versus the US dollar on the parallel market, also known as the black market.
The Naira, which has been on a downward trend in recent weeks, fell to N557 against the greenback today from 550/$1 the previous day (Monday).
The naira depreciation against global currencies worsened after the CBN stopped dollar sales to bureaux de change (BDCs) and barred Microfinance banks from handling foreign exchange transactions.
The fall in the naira rate to this new low has been linked to dollar scarcity and forex speculators hoarding the available greenback to maximize profit.
In emailed guide to investors, the Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said delaying of the multiple exchange rate system which had bedeviled the economy had been a subject of controversy for a long period.
“Now that it appears settled we should expect a crawling peg method and an increase in forex supply to ensure equilibrium in the market. That notwithstanding, the CBN’s attempt to mop up excess liquidity could serve as a temporary antidote to consumer price inflation which still remains stubbornly high (18.12 percent),”Rewanne, an economist, said.
Rewane had attributed the naira’s continued decline to a heightened forex supply shortage, demand pressure, and rationing.
He said naira rates convergence would require the adoption of a fully floating exchange rate system determined by the forces of demand and supply.
Likewise, the International Monetary Fund (IMF) said exchange rate rigidities have constrained the economy’s ability to absorb external shocks.
The IMF insisted that restrictions on access to foreign exchange for certain categories of goods, and multiple exchange rates create distortions in both private and public sector decision making. They discourage long-term investment, encourage smuggling, and provide avenues for corruption.
Moving forward, the Fund suggested removal of foreign exchange restrictions, and a full exchange rate unification, in line with the authorities’ Economic Recovery and Growth Plan (ERGP), will help keep the parallel market premium low in a more sustained manner.
It, therefore, called for a unified exchange rate for the naira to promote growth and attract foreign capital.
According to the IMF, foreign exchange backlog and shortages are intensifying Balance of Payment (BoP) pressures insisting that exchange rate unification was imperative to reduce BoP risks. It is said that fiscal deficit will stay elevated in the medium term, while additional domestic revenue mobilization is required to reduce fiscal risks.
Forex Trading Associate, AZA, global forex trading dealer, Oghenefejiro Eduviere, said exchange rate volatility will persist, with inflation concerns mitigated by the rise in crude oil prices this year with Brent Crude now selling at $73.33 per barrel.
Newsone reports that the Naira had its first major all-time fall against the United States dollar on Monday, August 30, 2021, sliding to an all-time low of N527 against the United States dollar at the parallel market otherwise known as the black market