By John Ikani
The value of Nigeria’s Naira continues to decline against major currencies, as the exchange rate for one US dollar reached N950 in the Lagos Parallel Market on September 15, 2023.
The Naira also experienced depreciation against the British Pound and the Euro, shifting from N1190 for £1 to N1210 for £1 and from N995 for €1 to N1020 for €1, respectively.
This ongoing depreciation occurs amidst a persisting currency crisis that has prompted many Nigerians to consider embracing the dollar as an alternative.
Despite reassurances from the Central Bank of Nigeria (CBN) to tackle the issue, supply constraints remain unresolved, and speculators continue to operate unhampered.
On Thursday, September 14, 2023, Vanguard reported a surge in the parallel market exchange rate, rising by N23 to N950 per dollar, compared to N927 per dollar the previous day.
The surge is attributed to the growing scarcity of the dollar coupled with soaring demand.
Within the Investors and Exporters (I&E) window, the naira depreciated to N780 per dollar, marking a significant increase from the previous rate of N758.12 per dollar on Wednesday.
Consequently, the gap between the official and parallel market exchange rates widened to N170 per dollar on Thursday, up from N168.88 per dollar on Wednesday.
This downward trend in the foreign exchange market has persisted since the CBN’s reforms on June 14, which aimed to eliminate multiple exchange rates in the official market and introduce a ‘willing buyer willing seller’ model for exchange rate determination in the I&E window.
Despite these measures, reports from forex market sources indicate that they have yet to generate enough supply to meet the growing demand for dollars in the economy. This has led to a significant 20.5% depreciation in the exchange rate since the implementation of the new system.
Furthermore, Nigeria’s external reserves have dwindled, dropping from $34.6 billion when the managed float system was introduced to $33.2 billion as of September 12, 2023.
Despite these challenges, President Bola Tinubu’s administration remains steadfast in defending its policy, emphasizing its importance in preserving the country’s foreign reserves and attracting foreign investment.