The Nigerian Naira (NGN) has experienced a continuous decline in value against the US Dollar (USD) due to a growing scarcity of the American currency. Recent reports reveal that the Naira began trading at 1,175 NGN to 1 USD at the parallel market, ultimately closing at 1,190 NGN to 1 USD last Friday. This marks a significant decrease compared to just two weeks ago when the Naira was trading at 1,100 NGN to 1 USD in the parallel market.
While the parallel market witnessed a concerning devaluation, there was a slight appreciation in the Naira’s value within the Investor and exporter forex window. It closed at 808.28 NGN to 1 USD at the end of Friday’s trading session, as opposed to the 810.05 NGN to 1 USD recorded on the previous Thursday, according to the FMDQ (FMDQ OTC Securities Exchange). Nevertheless, this marginal improvement in the official market has not eased the overall scarcity of USD in the country.
Bureau de Change (BDC) Operators, who play a crucial role in facilitating forex transactions, have been grappling with the challenges posed by the USD scarcity. Some operators have reported their inability to source the required USD for customer transactions. A BDC operator, Jubril Mutiu, emphasized, “On Friday, the price was 1,175 NGN to 1 USD, but we don’t even have it. It is not available right now.” This shortage of USD has caused significant disruptions in the forex market.
Adamu Afeez, another BDC operator, shared that they are actively seeking individuals willing to sell USD to them. However, he noted that a lack of available funds hampers their ability to make purchases, stating, “Without the required currency, we are unable to engage in any selling transactions.”
Ibrahim Abu, yet another BDC operator, expressed the volatile nature of the exchange rate. He disclosed, “We sold for 1,175 NGN to 1 USD in the morning till afternoon on Friday. By 2 p.m., it was already selling for 1,190 NGN to 1 USD. It has been fluctuating. I don’t know what the rate will be on Monday.”
The Naira’s persistent devaluation follows the Central Bank of Nigeria’s (CBN) directive to financial institutions to allow the exchange rate to float freely in June. Prior to the floatation of the Naira, it traded at an official rate of 471.67 NGN to 1 USD on the FMDQ and 765 NGN to 1 USD in the parallel market in June.
Dr. Aminu Gwadabe, the President of the Association of Bureaux De Change Operators of Nigeria, emphasized the importance of the retail forex market’s active participation by BDCs to achieve exchange rate stability. Gwadabe acknowledged the challenges facing Nigeria’s forex market and the depreciation of the Naira, underscoring the need for cooperation among all stakeholders.
He stressed that BDCs, licensed to operate at the retail end of the forex market, should be instrumental in providing lasting solutions to the ongoing exchange rate volatility. Gwadabe stated, “The continuous depreciation of the Naira in official and parallel markets does not benefit the BDCs and the domestic economy. Hence, steps should be taken to reverse the trend and strengthen the local currency for maximum economic impact.”
Gwadabe noted that, like other market segments, market illiquidity remains a significant concern for the BDC sector. He also expressed displeasure with unlicensed forex dealers who engage in speculative activities, tarnishing the reputation of the sub-sector.
The depreciation of the Naira against the US Dollar remains a matter of concern for the Nigerian economy, necessitating collaborative efforts to stabilize the exchange rate and address the prevailing challenges.