The parallel market exchange rate has fallen significantly, reaching a record low of N2040 per Great Britain Pound (GBP), owing to sustained demand pressures that are eroding the currency’s worth.
This represents a significant fall of 5.39%, or N110, from the N1,930 rate reported the previous day.
This depreciation stands as an unprecedented occurrence, representing the lowest point in the historical performance of the Naira.
Concurrently, black-market exchange rates have continued to reflect the devaluation of the Nigerian naira, compounded by a significant increase in inflation, according to the National Bureau of Statistics (NBS) for January 2024.
The inflation rate rose to 29.90%, a considerable increase from 28.92% the previous month.
This data shows a notable increase in the headline inflation rate for January 2024, with a 0.98% increase over December 2023 statistics.
These events continue despite the Central Bank of Nigeria’s (CBN) execution of many policies targeted at increasing the supply of foreign exchange (forex).
The CBN recently announced that multinational oil firms (IOCs) operating in Nigeria would no longer be required to immediately repatriate 100% of their forex revenues to their parent businesses abroad.
Similarly, the Naira fell against the dollar in the parallel forex market, where forex is unofficially transacted, with the exchange rate quoted at N1,655/$1, down 3.93% from the N1,590 rate it ended at the day before.
Furthermore, the Naira depreciated by 4.09% against the Euro, closing at N1720/EUR1 vs N1650/EUR1 the previous day.
Factors Influencing Depreciation
Market observers attribute the latest decrease to a persistent increase in demand for dollars, which has been seen since the beginning of January. The biggest contributors to this increased demand are:
A significant percentage of the demand is related to enterprises actively seeking to resupply items or acquire raw materials, resulting in increased demand for foreign exchange.
Individuals seeking international studies have also contributed significantly to the need for dollars. This development is most likely linked to the necessity for tuition payments and other educational expenses.