Forex Shortages Blamed After Nigerian Currency Hits New Low Versus the US Dollar
A surge in the demand for foreign exchange and the general scarcity of the resource may be the reasons why the naira currency recently slumped to a new all-time low of 735 versus the U.S. dollar, a report has said. One Nigerian currency dealersaid he expects the naira to further depreciate to 750 per dollar in October. Foreign Exchange Scarcity
On September 29, the Nigerian currency lost further ground versus the greenback after the naira’s parallel market exchange rate slumped to 735 units per dollar. The naira’s latest plunge came just days after the Central Bank of Nigeria (CBN) announced a 150 basis points (bps) upward adjustment of the monetary policy rate (MPR).
As reported by Bitcoin.com News just before the CBN’s interest rate increase, one U.S. dollar bought 720 nairas on the foreign exchange parallel market. The Central Bank of Nigeria has in the past suggested that the naira’s fall may be linked to the activities of currency speculators.
However, according to a report in the Business Post, the naira’s latest plunge is potentially tied to the scarcity of foreign exchange as well as the surge in the demand for this resource. As explained in the report, the over 95% increase in forex requests on the official market — from $119.49 million to $223.30 million — may have played a part in accelerating the naira’s fall to a new all-time low. Naira Official Exchange Still Unchanged
To back the assertions that foreign exchange shortages have also contributed to the currency’s fall, the report quotes a currency dealer from the Egbeda area of Lagos State in Nigeria. The currency dealer said: We have not been able to get dollars at the banks and other sources.
Another dealer, Alhaji Isa, reportedly implored Nigerian residents to convert their savings to the greenback “because, with the rate things are going, it [the parallel exchange rate] might hit N750/$1 next month.”
Despite the many reports suggesting that the naira’s losing ground versus other currencies on the forex parallel market, the CBN continues to peg the naira’s official exchange rate at just under 440 units of the local currency for every dollar. This, in turn, has seen the gap between official and parallel market exchange rates widen to 65%, the currency’s largest gap since 2016.
Register your email here to get a weekly update on African news sent to your inbox:
Tags in this story Central Bank of Nigeria (CBN), currency speculators, Exchange rate, Monetary Policy, naira depreciation, naira parallel market
What are your thoughts on this story? Let us know what you think in the comments section below. Terence Zimwara
Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route. Robert Kiyosaki Predicts US Dollar Will Crash by January — Suggests Buying Bitcoin ECONOMICS | 9 hours ago S&P Global Report Says EU and UK Are in a Recession, Putin Thinks the West Is Greedy ECONOMICS | 16 hours ago
Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleJapanese Gaming Giant Sega to Launch First Blockchain Game Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItUAE Airliner Emirates to Launch NFTs and Experiences in the Metaverse
United Arab Emirates (UAE) airliner, Emirates, has announced plans to launch non-fungible tokens (NFT) and experiences in the metaverse for its workers and customers. The launch aligns with UAE"s digital economy and virtual assets initiatives. First Projects Already Underway The ... read more.Goldman Predicts US Recession Odds at 35% in 2 Years, John Mauldin Wouldn"t Be Surprised if Stocks Fell 40% Interest in Real Estate Investments in Spain Grew 400%, With Some Using Crypto and Stocks as Payment Method Microbt Reveals Latest Bitcoin Mining Rigs — Machines Produce up to 126 TH/s With Custom 5nm Chip Design Terra"s Algorithmic Dollar-Pegged Crypto UST Is Now the Third-Largest Stablecoin