Naira plunges to record low of N1,040 per dollar in parallel market

The Nigerian naira has hit a new low against the US dollar in the parallel market, trading at N1,040 per dollar on Wednesday. This represents a 4% depreciation from the N1,000 per dollar rate it traded two weeks ago. The naira has been under pressure due to the scarcity of foreign exchange and the high demand from importers and other users.

The official exchange rate, however, remained stable at N776.8 per dollar at the investors’ and exporters’ window, where most of the foreign exchange transactions are conducted. The gap between the official and parallel market rates has widened to over 33%, creating opportunities for arbitrage and speculation.

The naira’s decline has been attributed to the low level of Nigeria’s foreign reserves, which fell to $33.23 billion at the end of September, a two-year low. The reserves have dropped by $5.01 billion year-on-year and by $881.84 million quarter-on-quarter, according to data from the Central Bank of Nigeria (CBN).

The CBN has been struggling to meet the demand for foreign exchange in the face of dwindling oil revenues, Nigeria’s main source of foreign exchange. The CBN has also been intervening in the market to support the naira and maintain stability.

The World Bank recently ranked the naira and the Angolan kwanza as the worst-performing currencies in Africa so far in 2023, having depreciated by nearly 40%. The World Bank warned that the depreciation of the naira could have negative implications for inflation, debt sustainability, and economic growth.

The naira’s depreciation has also affected the prices of goods and services in Nigeria, as most of them are imported or dependent on imported inputs. The inflation rate in Nigeria rose to 18.7% in August, the highest in four years.

The naira’s outlook remains uncertain as the demand for foreign exchange continues to outweigh the supply. Analysts have called for more reforms and diversification of the economy to boost non-oil exports and reduce dependence on oil revenues.