Official And Parallel Markets Near Convergence as Naira Hits N1,500 Per Dollar

• The gap between the official and black market rates in the foreign exchange rate market has narrowed
• The development is due to the continued depreciation of the naira against the US dollar in all markets
• The development follows as the external reserves saw a marginal increase of $262 million to hit $32.627 billion

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.

The gap between official and parallel markets has narrowed to just N3 as the Nigerian currency continues to depreciate without continued interventions by the Central Bank of Nigeria (CBN) in the FX market.

In the last three weeks, the apex bank has failed to sell forex to Bureau de Change (BDC) operators, leading to the depreciation of the local currency in the parallel segment of the FX market.

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The naira depreciates in all markets

On Friday, May 10, 2024, the naira dropped in value to N1,479 per dollar in the parallel market.

The current value represents a 1.38% depreciation from the N1,450 recorded on May 9, 2024.

BDC operators quoted the buying rate of the dollar at N1,430 and the selling price at N1,470.

Meanwhile, in the official market, the naira depreciated by 0.45% to N1,466 on Friday, May 10, 2024.

Parallel and official markets near convergence

Data from the FMDQ Exchange reveals that the naira recorded a high of N1,490 per dollar and a low of N1,322.

The current figure leaves an exchange rate gap of N3.69 per dollar between the official and parallel markets.

According to reports, the CBN reviewed its directive on repatriating FX proceeds by international oil companies (IOCs).

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CBN suspends directive on FX repatriation by IOCs

The bank said the initial 50% of the repatriated proceeds can be pooled immediately as at and when needed.

It said that banks may submit the request for cash pooling ahead of the expected date of receipt, aided by required documentation for approval by the CBN.

CBN said:

“The 50% balance of the repatriated export proceeds could be used to settle financial obligations in Nigeria, whenever required, during the prescribed 90-day period.”

The CBN had placed a limit on transferring proceeds from crude exports by IOCs to offshore parent company accounts as part of reforms to curtail volatility in the forex market.

The bank stated that the transfer of funds by IOCs impacted the liquidity in the forex markets.

FX reserve rise

The development comes as data from the CBN reveals an uptick in reserves, closing at $32.369 billion as of May 7, 2024, up from the $32.107 billion recorded in the previous month.

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Naira weakens further as banks, currency dealers quote dollar at higher rates

Nigeria’s reserves have experienced a steady decline from $34.45 billion in March 2024 due to falling oil prices, debt servicing, and other CBN obligations.

The decline in the reserves led to the speculations that the apex bank was defending the naira with reserves.

Naira weakens further

Legit.ng earlier reported that the Nigerian currency, the naira, closed weaker at the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Wednesday, May 8, 2024.

Data from FMDQ Securities show that the naira crumbled to N1,421 per dollar in the official market, representing a 1.27% decline from the N1,403 per dollar it quoted the previous day.

Forex turnover in the FX market rose by 2.5% to $164 million on Wednesday, May 8, 2024, from the $160.77 million recorded on Tuesday, May 7, 2024.

Source: Legit.ng