The Nigerian naira has hit a new low against the US dollar in the black market, as the country faces a severe shortage of foreign exchange amid rising inflation and recession.
According to data obtained from various sources, the naira was trading at N1,910 per dollar for buying and N1,915 per dollar for selling on Thursday, February 22, 2024. This represents a 10.5% depreciation from the previous day, when the naira exchanged at N1,730 per dollar for buying and N1,735 per dollar for selling.
The black market, also known as the parallel market, is where individuals and businesses buy and sell foreign currencies without the official approval of the Central Bank of Nigeria (CBN). The black market rates are often influenced by the demand and supply of dollars in the market, as well as speculation and sentiment.
The CBN, however, does not recognize or endorse the black market rates, and advises individuals in need of foreign exchange to approach authorized banks, emphasizing the Interbank Foreign Exchange (I&E) window as the official channel for currency exchange.
The CBN’s official rate for the dollar to naira as of February 22, 2024, was N1,605 per dollar for buying and N1,607 per dollar for selling. This means that the naira was trading at a 18.9%premium in the black market compared to the official rate.
The naira has lost over 50% of its value against the dollar in the past year, as the CBN devalued the currency three times in 2023 to align with the market realities. The CBN also introduced various policies and interventions to boost the supply of dollars and ease the pressure on the naira, such as the Naira 4 Dollar Scheme, the Diaspora Remittance Policy, and the Export Proceeds Utilization Policy.
However, these measures have not been enough to meet the growing demand for dollars in the economy, especially from importers, manufacturers, and investors. The CBN’s foreign reserves, which are used to defend the naira and finance imports, have also declined by 15.6%from $36.5 billion in February 2023 to $30.8 billion in February 2024.
The depreciation of the naira has negative implications for the economy, as it increases the cost of imports, fuels inflation, erodes the purchasing power of consumers, and discourages foreign investment. The inflation rate in Nigeria rose to 18.7% in January 2024, the highest in four years, while the economy contracted by 3.2% in 2023, the second consecutive year of recession .
Analysts have called for more reforms and diversification of the economy to reduce the dependence on oil and increase the production of non-oil exports, which can generate more foreign exchange and create jobs. They have also urged the CBN to adopt a more flexible and unified exchange rate regime that can reflect the true value of the naira and improve transparency and confidence in the market.
