The Naira, Nigeria’s national currency, exchanged at N604/$ on Wednesday at the parallel, from N565 it exchanged to the dollar in early January this year, representing N39 loss year to date (YTD)
According to Bureaux De Change (BDCs) operators In Abuja, the surge in dollar demand is the result of politicians’ stocking up on dollars before registered parties’ primary elections commence this weekend.
Analysts noted that depreciation of the national currency’s exchange rate is sustained despite calls by the experts, including the World Bank and IMF’s analysts that the apex bank allows the Naira to float at the Fx market.
However, the Central Bank has maintained its managed float approach, thereby widening the exchange rates gap between the official Investors and Exporters (I&E) window and the black market.
Through its interventions, the apex bank fixes the exchange rate in the I&E window at around N418, indicating a gap of about N188 with the black market rate as the Naira continues to depreciates
Market analysts linked the sustained volatility in the FX market to shortage of forex supply as demand continues to surge over the months.
This is even as they noted that demand for the US dollar had significantly, increased recently, particularly due preparation for the 2023 elections that usually hike demand by politicians for foreign currencies.
The monetary authorities recently stated that Naira exchange rate depreciation was primarily caused by the import-dependency of the nation’s economy.
The apex bank’s Director of Corporate Communications, Mr. Osita Nwanisiobi, claimed that Nigeria’s over-dependence on imports was one of the reasons for the currency’s depreciation, stressing that “no successful economy thrives on the promotion of imported products over the exportation of locally manufactured products.”
Meanwhile, Nigeria’s external reserve dropped below the $39 billion threshold on Tuesday as the level recorded a 0.09% decline to stand at $38.88 billion from $38.92 billion recorded the preceding day.
Analysts believe that the decline in the external reserve level is partly attributable to the Central Bank of Nigeria’s (CBN’s) intervention in the FX market as part of its monetary steps to ensure the stability of the national currency.
