Naira hits record low of N955 as dollar scarcity worsens – On Friday, the Naira hit a new low of N955 to the dollar due to rising demand for the greenback on the parallel market, also known as the black market.
The value of the naira has dropped by 0.53 percent in just over 24 hours, according to the most recent figures. On Thursday, the naira traded for N945, up from the N950/$1 closing rate but down from the N940 sold on the black market on Wednesday.
According to information provided by the FMDQ, the naira depreciated by 2.88 percent on Thursday as the dollar was quoted at N780.00, down from N758.12 on Wednesday and down from N742.10 on Tuesday.
Thursday’s daily FX turnover of $69.74 million was up 31.90 percent from Wednesday’s $52.87 million.
A dealer at Lagos International Airport stated, “Individuals and importers are buying up dollars for business travel, school fees, medical, and tourism.”
Vetiva Research found that after the Nigerian monetary authorities unified the foreign exchange rates, the value of the Naira plummeted.
Over the next few months, the government of Nigeria plans to implement a medium-term multilateral loan and bring back Bureau de Change operators to the country’s foreign exchange framework. According to a new analysis by Vetiva’s research team, “we believe these measures are inadequate without organic FX supply and sterilisation.”
Our pessimistic prognosis on the Naira continues into the autumn months until oil production increases noticeably. Nonetheless, economists indicated that increased interventions (while unsustainable) could slow the rate of depreciation on the black market.
Bureau de Change (BDC) owners could be integrated into the regulatory system for foreign exchange, as suggested by Vetiva. The bank claimed that BDCs needed a 2.5 percentage point profit margin over the prior day’s average rate sold in the foreign exchange market. There will be a requirement for filing taxes as a part of this reinstatement.
While these steps are being taken, we believe the underlying low FX supply could widen the FX gap even if they are successful. Analysts agree, saying that actions are needed to increase oil supplies and organically expand the stock of external reserves.
According to the data, Nigeria’s reserves are more than enough to support the country’s excess current account.
Therefore, Nigeria’s debt-reserve ratio is considered healthy. When it comes to paying down its short-term foreign debt, South Africa also has plenty of reserves to do so.
The current account balance is a measure of the net domestic currency influx and outflow of commodities and services, primary and secondary investment incomes, unrequited transfers, and employee compensation. It’s one of the two most important parts of the BOP.
The surplus or deficit in the current account reflects the success or failure of a country’s exports and imports of commodities and services.