Thursday, September 21, 2023

Naira falls to a record 980 on black market

Nigeria's naira fell to a record low on the black market on Wednesday, driven mostly by speculative demand as individuals turn to the dollar as a store of value, traders said.

The unit was quoted at 980 naira to the U.S. dollar on abokiFx, a firm that publishes online black market exchange rates for the currency, compared with 965 on Tuesday.

The naira was quoted at 773.50 on the official market at 1349 GMT, swinging between a range of 738 naira and 789 naira this month.

"The current free fall of the naira is mostly driven from speculation as the black market premium has reached 23.3%," one trader said.

"The pressure also shows that liquidity in the official market is unable to support about $400 million petroleum importers need monthly to import refined fuels, given their 70% control of the market," he said.

The currency of Africa's largest economy has been weakening on the black market due to speculative activities and as excess demand is funnelled to the informal market, widening the gap with the official market, where restrictions on trading the currency was lifted in June.

One of the key challenges for newly nominated central bank governor Olayemi Cardoso will be to boost dollar liquidity to help stabilize the currency. 

By Elisha Bala-Gbogbo, Reuters

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