BREAKING: Naira hits 960/$ as marketers propose N720/litre

The alarming disparity between the demand and supply of dollars in banking institutions and on the black market is causing a sharp decline in the naira’s value.

In under three weeks, the naira plummeted, moving from 860/$ to a staggering 960/$ on the black market.

Before Nigeria’s Central Bank transitioned to a free-floating exchange rate system in June, the naira was stable at 471/$. The day after the shift, it surged to 664/$, but the stability was short-lived. Extreme fluctuations began, especially in the unofficial markets.

Recently, the naira plummeted even further, going below the N900/dollar threshold, with closing rates of 740.60/$ in official windows and an alarming 930/dollar and 960/$ in Lagos and Abuja’s black markets, respectively.

This crisis stems from a dollar scarcity afflicting banks. Many financial institutions report they can’t satisfy customer demands for the U.S. currency. The black market dealers echo these concerns.

A bank representative pointed to the Central Bank of Nigeria‘s (CBN) policy changes in June, which resulted in significant funds being transferred overseas, amplifying the demand-supply gap.

“Despite repatriation through banks, the dollar demand continues to skyrocket. People are amassing dollars as there’s little confidence in policy consistency. Banks can’t secure forex from the CBN as they used to,” an insider reported.

Another top-tier bank official highlighted the severity of the issue, stating that the regular supply of dollars from the CBN has almost ceased, pushing banks to desperately seek foreign exchange sources.

Aminu Gwadabe, President of Nigeria’s Bureau De Change Association, commented on the turmoil, pointing out that speculators are exploiting the naira due to forex market illiquidity. He further revealed, “With the limited forex supplies, banks are rationing available funds, neglecting essential client needs like medicals and education, thus intensifying the burden on the black market.”

Gwadabe expressed concern over many licensed Bureau De Changes (BDCs) losing clients to unregulated sectors due to stringent KYC requirements. He urged for a review of financial structures to incorporate BDCs and called for the creation of favorable policies to stabilize the situation.

To counteract this crisis, Gwadabe emphasized the need for a consistent exchange rate, curbing illegal activities like hoarding, and fostering collaborations between the Central Bank, Federal Government, and stakeholders.

Meanwhile, oil marketers, on Sunday, indicated that the cost of Premium Motor Spirit, popularly called petrol, would rise to between N680/litre and N720/litre in the coming weeks should the dollar continue to trade from N910 to N950 at the parallel market.

They also hinted that dealers seeking to import PMS were being forced to put the plans on hold due to the scarcity of foreign exchange to import the commodity.

The warning came barely one week after the local currency crossed the N900/dollar ceiling, with the naira selling at over 945/dollar at the parallel market on Friday.

Oil dealers said the CBN Importers and Exporters official window for foreign exchange, which boast of a lower exchange rate of about $740/litre, had remained illiquid and unable to provide the $25m to $30m required for the importation of PMS by dealers.