By Kayode Sanni-Arewa
Nigeria is facing a severe foreign exchange crisis as the naira continues to depreciate against the dollar in the parallel market. The naira traded at N986 per dollar on Saturday, September 23, 2023, a record low for the local currency, Newsflash Nigeria reports.
This represents a huge gap of N216 from the official rate of N770 per dollar at the Investors & Exporters FX window, where most foreign exchange transactions are conducted.
The Central Bank of Nigeria (CBN) had announced the unification of all segments of the foreign exchange market in June, but the policy has failed to address the scarcity of dollars in the economy.
The parallel market, also known as the black market, is where individuals and businesses buy and sell foreign currencies without official regulation. The high demand for dollars in this market is driven by the limited supply of dollars at the official market, according to operators.
“There is scarcity at the market,” said Ismail Muhammed, one of the operators at Allen Roundabout in Lagos. “We are now buying dollars for N980 but earlier in the day, it was sold for N985. Some people exchanged it for N988,” he said.
Another operator, Alhaji Abdullahi Olugbede, said that the surge in the exchange rate was caused by the lack of dollars among licensed Bureau De Change Operators. “When there is scarcity, the dollar will go up against the naira but we are not happy. We should pray that it will come down because this is not good,” he said.
The depreciation of the naira in the black market has negative implications for the economy as it affects the cost of doing business and the price of goods and services. Professor Godwin Oyedokun, a tax and forensic expert at Lead City University, Ibadan, said that the exchange rate is a key factor in determining the economic performance of any country.
“I am not currently in the country. Let me cite an example, I wanted to buy a can of coke today in Jordan. I could buy the same can of coke for $2 that is almost N2, 000 if a dollar exchanges for N990 in Nigeria as you said. This is just because the strength of our currency is very weak,” he said.
“The implication is that goods that Nigerians should get from abroad, let's say if dollar to naira is 1/1, Nigerians will now spend as high as 990 minus 1; that is, goods worth N300,000 will now be worth times 990 of it. So, it makes it so difficult to do business. Every sector of the economy will adjust to this and will make the price of commodities become costly,” he added.
Professor Oyedokun, however, said that the pressure on the naira can be reduced if the government implements the right policies and also boosts local production so that Nigeria can earn more foreign exchange from exports.
“The only way to address this is to have the right policies in place which the current government is doing and have things that we can also export to earn foreign exchange.
“The finance minister and the new CBN governor will need to think about how the fiscal and monetary policies can work together effectively so that we can have a country of our own. It will interest you that Jordan's currency, Jordanian Dinar, is higher than the dollar, it is about $1.41. If we get the policies right, the pressure on the naira will reduce,” he said.
President Bola Tinubu recently nominated Olayemi Cardoso, a banking executive and former civil servant, to serve as the new governor of CBN. Tinubu also approved the nomination of Emem Nnana Usoro, Muhammad Sani Abdullahi Dattijo, Philip Ikeazor and Bala Bello as deputy governors of the apex bank, for a term of five years at the first instance, pending their confirmation by the Nigerian Senate.
The former CBN governor, Godwin Emefiele, who was suspended and has been in detention since June, has resigned from his position last week