Nigeria’s forex crisis is far from over as Naira sold for over N1,000 to a dollar at the parallel market. The gap between the official and parallel markets has gradually widened since the Central Bank of Nigeria (CBN) announced the unification of all segments of the foreign exchange markets in June.
On Thursday, a dollar was exchanged for between N1,000 and N1,050 at popular black markets in Kaduna.
In the evening hours of Thursday, it settled for N990, indicating a difference of N252 from the Investors & Exporters forex window, where the naira closed at N738.
In spite of the unification policy, the parallel market has continued to witness patronage due to the scarcity of dollars at the official forex market, according to operators. The three key problems that afflict Nigeria’s forex market are the lack of transparency, foreign exchange shortages and volatility
Experts say the depreciation of the naira in the black market is negative as it will adversely affect the economy. Economist and former Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf, said that among others, it will have an effect on inflation as the economy is very sensitive to exchange rate movement.
“The implications are very negative to put it mildly because it shows there are some fundamental challenges that we still need to deal with that are driving the exchange rate. We need to further interrogate how deep the parallel market is and what percentage of economic activities are being funded by the parallel market.
“We need that research, we need that data because each time we talk about the exchange rate, people don’t even talk about the official rate anymore, we just talk about the parallel market,” he said.
Citing the likely effects on the different sectors of the economy, he said, “Diesel price has gone up, gas price is likely to go up. The PMS is under pressure and should have gone up if not for the fact that the president said that NNPC should hold on, otherwise petrol price should have jumped to over N800 by now.”
Yusuf, who is also the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), said that some extraneous variables including money laundering might be responsible for the pressure on the naira.
“I think there are some extraneous variables that have not been captured in our analysis because this speculative assault on the naira is not looking ordinary anymore. I am beginning to worry that perhaps, there are quite a number of illicit funds that are putting this pressure on the Naira because how many manufacturers can continue to buy dollars at this rate? And yet it keeps going up and people are buying it. How many people with genuine income or resources can do that? It is possible there are factors around money laundering, possibly people have loads of naira they are seeking to convert to dollars,” he said.
The current pressures have defied the forecasts of many economists when the unification policy was introduced, he counselled the government against jettisoning the policy.