Naira Hits N1,590/$ in Black Market as Dollar Shortage Worsens
On Friday, the Nigerian naira dropped to a record low of N1,590 against the US dollar in the parallel market, also known as the black market. This decline was caused by a severe shortage of dollars in the market.
What Led to the Naira’s Decline?
This is the first time the naira has fallen to this level since February 16, 2024, according to data gathered from street traders and online platforms. Compared to the previous day, the naira lost N5, as the dollar was traded at N1,585 on Wednesday in the black market.
Why Are Dollar Supplies Drying Up?
Bureau De Change (BDC) operators, who help exchange currencies, say they are not receiving enough dollars from commercial banks. This contradicts the Central Bank of Nigeria (CBN)’s directive, which allows BDCs to buy foreign exchange from authorized dealers with a weekly limit of $25,000.
Official Market Also Feels the Pressure
In the official market, known as the Nigerian Foreign Exchange Market (NFEM), the naira also weakened. On Thursday, it dropped by 0.6% or N9.13, with the dollar trading at N1,547.81 compared to N1,538.68 the day before, according to CBN data.
Dollar Rates in the Official Market
Authorized currency dealers reported the dollar at a high rate of N1,560 on Thursday, slightly lower than the N1,550 rate on Wednesday. The lowest rate recorded on Thursday was N1,543.09 per dollar, down from N1,532 the previous day.
How Is the Naira Performing Against Other Currencies?
The naira remained stable against other major currencies:
- British Pound: N2,020
- Euro: N1,690
- Canadian Dollar: N1,150
What Challenges Are BDC Operators Facing?
Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria (ABCON), highlighted the challenges BDCs are dealing with. These include:
- Limited availability of dollars
- Unfavorable exchange rates
- Few banks participating in the process
- Low profit margins
- General business uncertainties
What’s the Impact of These Challenges?
Gwadabe explained that these issues have led to a loss of confidence in the system. As a result, people are preferring to hold foreign currencies instead of the naira, speculative activities have increased, and the naira has continued to weaken.
What Does This Mean for Nigeria’s Economy?
The continuous fall of the naira is a major concern. It raises the cost of imports, increases inflation, and makes it harder for businesses and individuals to plan their finances. The government and the CBN will need to take urgent steps to stabilize the currency and restore confidence in the economy.
