Following a drop to 900 naira to every dollar, it seemed that the Nigerian currency was on the brink of collapse compared to its American counterpart. The currency has continued to depreciate even after the Economic and Financial Crimes Commission’s raid on suspected illegal foreign exchange dealers.
Continued U.S. Dollar Shortage
Following the Oct. 27 announcement by the Central Bank of Nigeria (CBN) that intends to put into circulation newly designed naira banknotes, the local currency’s parallel market exchange rate versus the dollar has slipped by almost 20%. At N760/$1 exchange rate at the time, the naira dropped to 900/0 by November 2.
As noted by several local media reports, the CBN’s decision to release the new banknotes as well as to demonetize the current 100, 200, 500, and 1,000-naira banknotes after Jan. 31, 2023, has sparked a rush to buy the greenback. A report states that there has been an increase in pressure on Nigeria’s currency due to a shortage of U.S. dollars on both the formal market and the parallel market.
Despite receiving the backing of President Muhammadu Buhari, the CBN’s currency redesign plans have seemingly failed to halt the naira’s slide.
One Nigerian economic expert, Andrews Elueni, the managing director at Flawless Capital Limited, was recently quoted suggesting that the naira’s exchange will slip past the N1,000:$1 mark before the end of 2022.
“It will get to N1,000 before the end of the year, the reason being that there is a lot of fraud and corruption in the system,” Elueni reportedly said.
The Official and Parallel Market Gaps Widen to 450
Despite the naira’s accelerated slide versus the dollar on the parallel market, Nigerian monetary authorities continue to keep the naira pegged at just under 450 per dollar.
Meanwhile, following the CBN announcement, Nigeria’s anti-graft body, the Economic and Financial Crimes Commission (EFCC) warned the public it would pounce on suspected illegal currency dealers. Local media reports claim that the EFCC raided bureaux of change operated by people accused of being involved in illegal foreign currency activities.
According to one report, when the EFCC pounced, the naira’s parallel market exchange rate stood at 840:1. However, more than 24 hours later, the gap between the currency’s parallel and official market exchange rates had widened to a new high of N450.
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