Naira plunges in parallel market as forex traders sell at N1045/$1
By Sodiq Adelakun
Naira’s decline in the parallel market has been a cause for concern as demand consistently outpaces supply.
Forex traders are now selling at N1045 to the dollar, indicating a growing scarcity.
This has resulted in a significant loss of over 40 percent in the naira’s value against the US dollar since the mid-June devaluation.
While the devaluation was intended to improve the country’s financial and foreign accounts, its inflationary impact was short-lived.
The dollar index, which measures the US currency against six major rivals, currently stands at 105.64, close to its lowest point since September 25.
The cautious tone is further reinforced by a mixed report on producer prices in the US, which rose more than expected in September due to increasing energy and food costs.
However, underlying inflationary pressures driving factory output are gradually easing.
Later in the day, the US will release Consumer Price Index (CPI) data, providing insights into inflation trends. This report is highly anticipated as it will shed light on the inflationary situation in the country.
Analysts expect the data to show moderate inflation in September.
A surprise drop in inflation would likely support the argument that the Federal Reserve (Fed) has concluded its tightening cycle, leading to a decrease in US bond yields and the value of the dollar.
Conversely, a bullish surprise in the CPI data would raise the likelihood of the Federal Open Market Committee implementing an expected 25 basis point increase, which could have a positive impact on the dollar and market sentiment.
The decline of the naira in the parallel market reflects the ongoing struggle for stability in Nigeria’s economy. The scarcity of foreign exchange and the subsequent devaluation have put pressure on the currency, resulting in a significant loss of value.
Meanwhile, the US dollar faces its own challenges, with the dollar index near its lowest point in recent months. The release of the CPI data will provide further insights into inflation trends and could potentially impact the Federal Reserve’s monetary policy decisions.
As both currencies navigate these challenges, market participants eagerly await the outcome of these economic indicators.
