As demand for the dollar went up, the value of the naira went down on both the official market and the black market. The difference between the two markets grew to as much as N150.
At the Nigeria Autonomous Foreign Exchange (NAFEX) market and the parallel market, the value of the naira fell from N875 to N930 on Thursday. The value of the local currency also fell on the parallel market.
Naira depreciation: six companies lose a total of N179.56 billion because of it.
Early this week, the local currency got stronger and was worth about N730 to the dollar at the NAFEX window. Then, it went down even more and was worth N782 to the dollar on Wednesday, which was the last time the FMDQ released statistics. On the market, however, trades had sold for as much as N800 to the dollar.
Currency sellers at the parallel market said that the dollar’s value had gone up because more people wanted to buy it. This may have something to do with people taking vacations outside of the country during the summer as well as the fact that makers and importers are putting more pressure on the official window.
Last month, there was less money coming in through the legal window, and the total amount was down by 65.7% from the month before. According to data from FMDQ, the amount of foreign currency that came into the Investors’ and Exporters’ (I&E) end of the market dropped from $1.77 billion in June to $608 million in July. This was the lowest number since April 2021, when $564.20 million came in.
Analysts say that as long as FX backlogs aren’t cleared up, they expect forex liquidity to stay tight in the near future. This is because foreign investors are still hesitant to return in large numbers, even though the forex market has opened up.
Analysts at Cordros Research said, “We expect weak foreign inflows in the short term, as foreign investors are likely to take a wait-and-see approach while they wait for the CBN’s actions to clear its forex backlogs and the direction of short-term interest rates in the face of high inflation.”