Naira Depreciates to N840/$1 at Official Market, Trades Lower in Parallel Market

Patrick OdeyJune 28, 2023

2 minutes read

The naira, Nigeria’s currency, has fallen to its lowest level ever against the US dollar at both the official and parallel markets. The exchange rate between the dollar and the naira at the official Investor and Exporter (I&E) window reached N840 to a dollar on Tuesday, the highest since the Central Bank of Nigeria (CBN) began floating the naira in 2017. The rate later closed at N768 after depreciating to N770.17 to a dollar.

At the parallel market, also known as the black market, where most Nigerians buy and sell foreign currencies, the naira traded between N765 and N775 to a dollar on Tuesday, according to Bureau De Change (BDC) operators. The naira depreciated by 0.39% at the parallel market due to increased dollar demand from travelers, students and businesses.

The naira’s depreciation comes amid Nigeria’s adoption of a market-driven exchange rate policy two weeks ago, which led to a sharp drop in the value of the local currency from N471 to a dollar to over N700 to one dollar.

The policy was approved by the federal government through the Joint Tax Board (JTB) and is expected to enhance the security, planning and accountability of the country’s transportation system.

According to reports, the I&E window recorded $198.13 million on Monday, June 26, 2023. The total turnover since the revised window was launched is about $1.4 billion.

The exchange rate has fluctuated between N750 to a dollar and N770 to a dollar in the last seven days, hitting an intra-day high of N840 on Tuesday.

The CBN has said that it will continue to intervene in the foreign exchange market to ensure stability and liquidity.

However, some analysts have argued that Nigeria needs to target an exchange rate of between 500 and 600 naira to a dollar, which requires reserves of up to $60 billion and a doubling of exports to support growth ambitions.

The naira’s exchange rate is a key indicator of Nigeria’s economic health, as Africa’s largest oil producer relies heavily on foreign exchange earnings from crude exports.

A weaker naira makes imports more expensive and fuels inflation, which hit a four-year high of 18.12% in April. It also affects the government’s revenue and debt servicing costs, as well as investors’ confidence and capital flows.