Concerns as Naira Falls to N950/$1 at Parallel Market
By Boniface Ihiasota, USA
Nigeria’s currency has continued its downward trend against the US Dollar, extending over two months following the Central Bank of Nigeria’s decision to float the Naira. This decision has amplified the existing challenges faced by Africa’s largest economy.
Since the forex market’s liberalization on June 14, the Nigerian currency has consistently weakened against the Dollar, depreciating from N750/$1 on the black market to N950/$1 as of August 14, 2023.
A significant concern, highlighted by Excel Magazine International, is the widening gap between the official exchange rate and the parallel market rate, showing a notable difference of N181. This divergence undermines the intended impact of the Naira’s floatation, as initially introduced by the Central Bank of Nigeria.
Ongoing investigations into the activities of the apex bank, led by special investigator Jim Obazee, appointed by President Bola Ahmed, appear to have contributed to the Naira’s depreciation, as indicated by sector experts.
Recent findings from the Central Bank of Nigeria’s consolidated financial statements spanning seven years reveal a combined debt of $7.5 billion owed to JP Morgan and Goldman Sachs. This debt burden, combined with a foreign reserve of $33.88 billion, continues to fuel the forex crisis, as explained by economist Prof Uche Uwaleke.
Folashodun Shonubi, the Acting Governor of the Central Bank, attributed the crisis to undocumented forex remittances and the unregulated nature of the parallel market.
The situation has taken a toll on Nigeria’s economy, heavily reliant on oil. Notably, oil marketers foresee further increases in petrol prices due to the rising value of the Dollar. This development compounds the challenges faced by citizens, who are still adjusting to the fuel price hike resulting from the removal of petrol subsidies in June.
In a post by DAILY POST, quoting Aminu Gwadabe, the President of the Association of Bureau De Change Operators of Nigeria (ABCON), asserted that unlicensed online platforms operating across various jurisdictions partly contributed to the ongoing forex market crisis.
He proposed designating BDCs as exclusive agents for diaspora remittances to mitigate these challenges and alleviate the crisis.
Idakolo Gbolade, Chief Executive Officer of SD & D Capital Management, attributed the ongoing decline of the Naira to reduced forex inflows, leading to a scarcity of foreign currencies.
He pointed out that major oil companies, establishments, and commercial banks have played a role in causing this scarcity due to their own interests.
Gbolade urged the government to implement policies that curb further deterioration within the sector and address associated challenges of inflation and high living costs.
