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The Nigerian naira experienced a decline in its exchange rate against the US dollar in both the official and parallel markets. At the Nigerian Autonomous Foreign Exchange Market (NAFEM), the official market, the naira exchanged at N1,534.39 to the dollar.
Meanwhile, at the parallel market, the exchange rate fell to N1,490 to the dollar, with traders anticipating further weakness in the coming days due to worsening dollar shortages.
This is the second time in recent months that the official exchange rate has been weaker than the parallel market rate.
On January 30, the naira had exchanged at N1,482.57 to the dollar at NAFEM, but it fell to N1,460 to the dollar at the parallel market due to persistent dollar scarcity.
Importers are facing difficulties in securing the necessary funds from both the official foreign exchange market and the black market.
The demand for dollars includes applications for Business Travel Allowance (BTA), Personal Travel Allowance (PTA), school fees, medical fees, and the needs of Small and Medium Enterprises (SMEs) highlighted by the use of Form Q.
According to a street trader interviewed by Business Day, the scarcity of dollars in the market and the high demand are driving up the price.
This scarcity has been attributed to Nigeria’s heavy reliance on imports for goods and services, as well as corruption-driven capital outflows, which hinder the country’s capacity to produce at scale.
To strengthen the naira, experts suggest finding non-market damaging ways to increase the supply of hard currencies and reducing the demand for them.
Urgent measures should be taken to address insecurity that hampers food production and to drive up the volume of domestic food products through pragmatic incentive programs.
Additionally, all government consumption expenditures requiring the use of hard currencies should be suspended indefinitely.
This article was updated 11 months ago
