Naira Drops to Lowest Value As 1 Dollar Hits 1,050 Naira on Black Market – See Reasons Below
The Naira has hit a new low, with an exchange rate of 1 Dollar to 1,050 Naira on the black market. Discover the factors behind this decline and the Central Bank of Nigeria’s efforts to stabilize the foreign exchange market.
In recent news, the Nigerian Naira faced a significant devaluation, plummeting to its lowest point in history. The exchange rate reached an alarming 1,050 Naira to 1 US dollar on the black market. This abrupt depreciation was primarily driven by an escalating demand for dollars in the parallel market.
To put this into perspective, the Naira’s fall represents a relatively small decline of 0.09 percent, as it was previously trading at 1,049 Naira to 1 US dollar earlier in the day. Remarkably, the Naira had managed to maintain stability at this rate since the previous Friday in the black market.
One of the street traders provided an insight into the situation, explaining that individuals seeking dollars for various purposes, including business trips, education, medical requirements, and tourism, resorted to unofficial channels due to their inability to meet their demands through the official foreign exchange market.
The Naira’s devaluation against the US dollar was further exacerbated by a reduction in liquidity within the foreign exchange (FX) market, especially an 18.72 percent decline in the official market. On Monday, the dollar was quoted at 778.80 Naira, a notable increase from the 764.86 Naira quoted the previous Friday at the Investors’ and Exporters’ (I&E) forex window, which serves as Nigeria’s official foreign exchange market.
Data from the FMDQ, a financial market platform, revealed that the daily foreign exchange market turnover, which serves as an indicator of market activity, witnessed an 18.72 percent decline, plummeting to $43.09 billion on Monday from the $53.02 billion recorded on Friday.
The Central Bank of Nigeria (CBN), charged with maintaining price stability, has publicly announced its commitment to injecting liquidity into the Nigerian foreign exchange market through interventions as required. They have also emphasized that, as market liquidity improves, these interventions will gradually decrease.
The CBN has been consistent in underlining its dedication to ensuring that exchange rates are determined by market forces through the “Willing Buyer – Willing Seller” principle. This signifies their intent for exchange rates to be determined by the dynamics of supply and demand rather than being artificially controlled.
Furthermore, the CBN has emphasized that FX rates should be referenced from recognized platforms such as the CBN website, FMDQ, and other authorized trading systems. This is intended to promote transparency, credibility, and fairness in FX rates.
In summary, the Naira has encountered a substantial devaluation against the US dollar, reaching an all-time low of 1,050 Naira per dollar on the black market. This was primarily instigated by a heightened demand for dollars and a notable decrease in liquidity within the official FX market. The Central Bank of Nigeria is actively taking measures to maintain price stability and enhance transparency in the foreign exchange market, as the Naira’s value remains a critical concern for the nation.
Stay informed by subscribing to our platforms, and if you’re already a part of our community, please share these valuable insights with your contacts to keep them informed about this vital financial development.