Exchange rate plunges further to N930/$1 as dollar scarcity worsens

The naira plummeted to another record low of N930/$1 at the parallel market on Thursday, August 10, 2023, as the demand for dollar by importers and other end-users far outstrips supply.

This is further compounded by apparent non-intervention by the Central Bank of Nigeria (CBN) and the lack of a price control mechanism.

Operators who spoke to Nairametrics quoted rates as high as N930/$1 as against the N910/$1 that was quoted on Wednesday as they continue to continue to lament the scarcity of dollars amid higher demand.

They said they buy at N920/$1 and then sell at N930/$1, leaving a profit margin of at least N10.

The naira has now weakened by 18.7% since the beginning of August at the parallel market. The exchange rate weakened by 11.5% in the whole of July 2023.

Nairametrics reported on Tuesday that the exchange rate had crossed N900/$1 for the first time, an all-time low. However, higher demands and the unwillingness of some to sell the forex they have in their possession have continued to pile pressure on the exchange rate as bidders are made to bid higher.

Quotes for the British Pounds and Euro also rose to as high as N1,175 and N975 to the dollar respectively as of Thursday.

BDC operators kick: In an interview on Wednesday, the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadebe, called for a ban on the cryptocurrency platform Binance, citing its growing influence as the anchor for determining the exchange rate.

“If you know about Binance, you will know that Binance trading is becoming the anchorage of both the investors and exporters window and the parallel market, which is unfortunate.
So, we have to do something that can stop  Binance. It’s a competition; we need to ban Binance and the only way to do so is if you have liquidity.

As I speak, Binance is the most liquid market; they do 1.2 million transactions per second. So it’s a very liquid market but that is not a scary status, we can break it through our local content and peculiarities.” Alhaji Aminu Gwadebe

Scarcity everywhere

A currency trader has highlighted dollar scarcity as a major cause of the very high exchange rate with even the commercial banks complaining that they don’t have foreign exchange. This has made most of the importers and other end-users source for their foreign exchange requirements at the parallel market.

He said, ‘’The problem is that there is scarcity of foreign exchange and the demand is very high. Commercial banks are not really getting allocation from the CBN and do not have foreign exchange and so most importers and other end users go to the black market to source their foreign exchange.

The high exchange rate is due to low supply as most people with the dollars are not selling and most of the supplies are from diaspora remittances from individuals who sell their forex at whatever rate they like.’’

Wide disparity: The disparity between the official and parallel market rates still remains wide after the I&E window closed at N782.38/$1 on Wednesday, August 9th. 147.62

Although the exchange rate depreciated by 3.18% at the I&E window when compared to the N757.51/$1 that it traded on Tuesday, August 8th, the disparity still remains high at N147.62, which is still one of the widest since the unification of the naira on June 14th, 2023.
In contrast, the exchange rate unification was expected to bridge the gap between the official and black market rates.

Analyst point to pent-up demand as the major reason why most forex buyers continue to patronize the black market.

They suggest most importers still struggle to fill their needs on the official market especially with I&E window turnover averaging $80 million daily.