Nigerians hurried to purchase dollars a week after the central bank announced it would issue higher-value notes, causing the naira to plunge to a record low versus the dollar on the widely utilised black market.
According to Umar Salisu, a bureau de change operator in Lagos who monitors the statistics, currency dealers on the unlicensed parallel market on Tuesday offered as much as 830 naira per dollar.
The official exchange rate, which closed at 442.49 to the dollar, increased by a record-low amount, creating the largest-ever disparity of 88%.
Since the central bank last month revealed a plan to replace N200, N500, and N1,000 notes starting in mid-December, demand for dollars in Africa’s largest economy has increased.
At the end of January, the old bills will no longer be accepted as legal money. The central bank claims that the revamp will capture extra money and aid in better managing the money supply while reducing crime.
As has been the situation in Nigeria for many years, up to 85% of the country’s cash is currently in circulation outside of the banks’ vaults.
According to Salisu, currency street vendors had to combine their efforts to keep up with the rising demand. We share the business with other dealers because we don’t have enough to give all the buyers who come to us.
The naira reached a high of 845 to the dollar in the capital, Abuja, where exchange rates are typically higher, while, according to street sellers, the rate reached 830 in Kano, a commercial centre in northern Nigeria.
Nigeria maintains a system of numerous exchange rates, with the official spot rate dominating and being closely regulated by the central bank. The money is readily exchanged on the unreported black market.
The redesigned currency may cause the naira to weaken as people hurry to exchange their old notes, Nigeria’s finance minister Zainab Ahmed warned. The decision, according to President Muhammadu Buhari, will punish currency hoarders and reduce inflation, which reached a 17-year high in September.