Dollar trades for N792.50 at parallel market

By Sodiq Adelakun

One dollar is currently trading at an average rate of N792.50 at the parallel market, also known as the black market.

In some parts of Lagos like Festac, dollars are being quoted at N790 and N795 in Apapa, Lagos.

The current rate is 0.94 per cent (N7.5) higher than N785 traded on Wednesday, leading to a depreciation of the naira against the dollar.

Naira depreciation was attributed to increased demand for dollars by importers and individuals who want to travel for business, school, and other purposes.

“Demand for dollars is high. It is the same people who are buying it,” said one of the traders in Lagos.

At the Investors and Exporters (I&E) forex window, naira appreciated by 3.52 per cent following the activities of the willing buyers and willing sellers in the market.

After trading on Wednesday, the dollar was quoted at the rate of N742.31 as against N768.44 quoted on Tuesday, data from the FMDQ indicated.

On June 14, 2023, the CBN abolished segments of the official FX market to the I&E Window, where the “willing buyer and willing seller” was re-introduced.

Based on this adjustment, the official rate rose from N463.38/$ to N742.31, the current rate.

For the past six years, the exchange rate regime consisted of a highly managed official rate and an FX market lacking in clear and predictable price discovery, including due to the use of multiple FX windows to serve multiple purposes, the World Bank said in a report.

This led to limited FX supply at the official rate, pushing economic agents into a parallel market to meet their FX requirements, and generated arbitrage and rent-seeking opportunities.

According to the report, aiming to reduce FX demand and preserve reserves while maintaining the stabilised official rate, the CBN also imposed administrative controls, including banning the use of FX for importing 43 products (comprising 936 product lines) since 2015, and reducing the size of its FX supply interventions since 2020.

Over all, FX market distortions increased in recent years, and the official rate became significantly overvalued: the benchmark exchange rate, the Nigerian Autonomous FX Rate Fixing (NAFEX) rate stood at N465 per US dollar in May 2023, while the parallel market rate was N763 per US dollar. This was a 63 per cent premium over the NAFEX rate and among the highest premiums in the world, the report stated.