Nigeria’s official currency rate, which has been edging closer to N100/$ as of last Friday, is now significantly different from those on the black market.
The BDC and P2P pricing remained unchanged at N870/$ while the I & E FX window closed at N777.82/$.
The disparity between the official and black market exchange rates for the naira is growing at its fastest rate since the currency’s unification, partly due to an excessive demand for US dollars that outpaces supply.
The Central Bank of Nigeria initially suggested permitting free trading up until the currency reached a level that was relevant to the market.
Market investors are already, however, voicing worries that the huge demand for foreign currency could result in additional depreciation of the local currency.
This situation is caused by a number of variables, including a substantial influx of foreign currency into the black market from non-oil sources like remittances, tourism, and non-oil exports.
Nigeria’s failure to achieve its OPEC quota also has a significant impact on the value of the Naira because oil continues to be a major source of foreign exchange earnings for the nation, but oil theft has resulted in falling oil income.
With actual output ranging between 1 million and 1.4 million barrels this year, Nigeria’s crude oil production has fallen short of OPEC’s aim of 1.74 million barrels per day.
Nigeria’s production has been reduced by OPEC to 1.38 million barrels per day, citing continued capacity issues that may further restrict the nation’s ability to earn foreign exchange in the long term.
As sellers compete for the greatest price for their US dollars, experts are now cautioning that the willing buyer-seller principle of foreign exchange trading might have detrimental short-term impacts on the Nigerian economy and jeopardize the goals of the Apex Bank.
The Naira continues to be under pressure as many Nigerians struggle to find dollars for necessities like tuition, healthcare, and import costs.
The country’s foreign exchange reserves have been falling recently despite the unification of the Naira, reaching $33.9 billion, the lowest level in two years, which was last observed in July-August 2021.
The country’s monetary and fiscal policies, political stability, security, and investor confidence in the economy are just a few of the variables that affect the stability of the Naira.
A significant part will also be played by the Central Bank of Nigeria’s adoption of new policies.
The President and his economic team should prioritize investments in education and skills development to develop a skilled workforce capable of fostering innovation and entrepreneurship while also addressing the problem of high insecurity, which could increase remittance inflows, in order to address these challenges.
Additionally, enhancing education at all levels, coordinating it with industry demands, and boosting vocational training will empower people and increase productivity in all industries.
The country’s monetary and fiscal policies, political stability, security, and investor confidence in the economy are just a few of the variables that affect the stability of the Naira.
