Naira Declines in Parallel Market, Official Exchange Rate Also Drops

The naira experienced a significant drop in value on Wednesday, reaching a new low at the parallel section of Nigeria’s foreign exchange (FX) market. The currency’s value depreciated by 3.17 percent from the previous trading day, moving to N1,300 against the U.S. dollar, from the N1,260 recorded on April 22.

Bureau de change (BDC) operators reported that the buying rate for dollars was set at N1,260, while the selling rate reached N1,300, resulting in a profit margin of N40 for traders in the parallel market. This decline represents an ongoing trend of instability within the foreign exchange system.

In the official FX window, managed by the FMDQ Exchange, the naira experienced a similar downward trend, dropping to N1,308.52 against the U.S. dollar. This reflects a 0.64 percent decrease from the previous trading day, when the rate was N1,300.15. This window observed a high of N1,367 and a low of N1,098 during the day.

Despite the decrease in both the parallel market and the official window, the Central Bank of Nigeria (CBN) made adjustments in its dollar allocation rates to BDC operators. A circular signed by Hassan Mahmud, Director of Trade and Exchange Department at CBN, stated that the bank sold $10,000 at the rate of N1,021 per dollar to each BDC. This adjustment indicates a move to stabilize the FX market and align the official and parallel market rates.

Earlier in the month, the CBN had sold foreign exchange to BDC operators at varying rates, from N1,101 on April 8 to N1,251 on March 25, and N1,301 in February. The continuous fluctuations in exchange rates demonstrate the challenges facing Nigeria’s FX system, emphasizing the need for further measures to stabilize the market and strengthen the naira.