Naira Hits Historic Low of N900/$1 on Parallel Market Amidst Overwhelming Foreign Currency Demand.
On Tuesday, August 8, 2023, the naira experienced an unprecedented plunge, sinking to a historic low of N900/$1 on the parallel market due to an intense surge in demand for foreign currency that surpassed its supply.
Ejes Gist News conducted interviews with forex traders, who quoted exchange rates as high as N900/$1 for ‘inflows’ and N895/$1 for cash transactions. ‘Inflows’ refer to the sale of forex through interbank transfers, which typically carries a higher cost than cash transfers.
Simultaneously, the peer-to-peer market, where cryptocurrency traders engage in forex exchanges, witnessed the exchange rate soaring beyond the N900/$1 threshold.
In the official Investor and Exporter Window, the exchange rate concluded at N774.78/$1, while the NAFEX rate stood at N776. The official market also faces supply constraints, with an average daily turnover of $80 million since July.
Naira Suffers 16% Decline Post Forex Unification.
Since the unification of exchange rate windows, the exchange rate between the naira and dollar has weakened by 16%. This contrasts with the 2.5% depreciation recorded between January 1 and June 14 (pre-unification). The naira experienced a 22.9% depreciation throughout the entirety of 2022.
The naira has faced sustained pressure in the parallel market for several weeks due to inadequate forex supply from official sources. At the start of the second half of the year on July 1st, the parallel market’s exchange rate hovered around N772/$1.
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However, the surge in demand from various sectors such as importers, foreign travelers, and speculators has induced exchange rate instability.
Insights from Forex Traders
Ejes Gist News engaged forex traders who attributed the naira’s depreciation to a scarcity of supply. They observed an imbalance between buyers and sellers in the market, anticipating that the situation might not ameliorate in the near future.
Upon querying the source of heightened demand, traders identified diverse groups of buyers, including importers, foreign travelers, and speculators.
Concerns Loom as Demand Escalates
Forex analysts voiced apprehension to Ejes Gist News , highlighting a substantial backlog of unmet forex demand in the official market, approximating $8-10 billion.
CBN Official Naira to Dollar exchange rate today August 9, 2023
A portion of this unmet demand spills over to the parallel market, as buyers struggle to fulfill their needs from the official market’s supply.”
