Gap Between Official, Black Markets Widens as Naira Depreciation Begins amid FX Turnover Decline

• The naira has begun another round of depreciation following slowed supply in the FX market
• According to data from the FMDQ Exchange, the naira depreciated on Tuesday, September 3, 2024, in the official and parallel markets
• The depreciation led to the widening of the gap between the official and black markets to 49.23 per dollar

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

There are signs that another round of naira depreciation has begun following increased demand amid a growing supply gap.

On Tuesday, September 3, 2024, the naira deprecated to N1,635 per dollar in the parallel market from N1,625 per dollar it traded on Friday, August 29, 2024.

Naira falls in official and parallel markets

Meanwhile, data from the FMDQ Exchange shows that the official exchange rate depreciated to N1,611.34 per dollar from N1,598.56 per dollar.

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This development led to a widening gap between the official and parallel market rates to N49.23 per dollar, defeating the Nigerian government's plan to unify the FX windows.

Currency dealers said the renewed pressure on FX rates in the black market was due to the decline in dollar supply at the official market segment, leading to high demand on the parallel market.

FX turnover falls by 25%

According to a Vanguard report, the volume of FX turnover in the market declined by 58.8% on Tuesday, September 3, 2024, to $71.18 million from $172.8 million traded on Friday, August 30, 2024.

The dollar supply dropped 25% monthly to $3.25 billion in August from the $4.34 billion recorded in July 2024.

The parallel market operators disclosed that the exchange rate increased on Tuesday, September 3, 2024, due to heightened demand, stating that they did not get a corresponding rise in supply.

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FX reserves fall

Findings show that Nigeria’s FX reserves dipped, losing $490 million during the period under review.

According to data from the Central Bank of Nigeria (CBN), the reserve dropped by 1.3% monthly to $36.3 billion as of August 29, 2024, from $36.79 billion recorded as July 31, 2024.

Financial experts attributed the decline to CBN’s intervention in the foreign exchange market.

Janet Ogochukwu, a senior banker and economist, attributed the decline in the official rates to a supply shortage, stating that Nigeria is not earning enough in terms of FX.

“Despite the increase in crude oil price, Nigeria is not earning enough. I understand the authorities are increasing crude oil production to at least two million barrels daily. Still, at the moment, the country’s FX earnings are not enough to shore up the value of the local currency,” she said.

CBN crashes dollars for importers to clear goods

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Legit.ng earlier reported that the CBN had slashed the foreign exchange rate for cargo clearance in Nigeria’s ports.

The development came notwithstanding the crash of the Nigerian currency, the naira, in the official market on Friday, August 30, 2024.

Data from the FMDQ Exchange shows that the naira crashed to N1,598.55 per dollar compared to the N1,593.93 traded on Thursday, August 29, 2024.

Proofread by Kola Muhammed, journalist and copyeditor at Legit.ng

Source: Legit.ng