The Naira may continue to maintain its instability in the foreign exchange market in 2022 as one US dollar was sold at NGN562/$1 by some Bureau De Change operators Saturday, January 1, 2022
The BDCs bought $1 at NGN555 at Ikeja and other parts of Lagos, Nigeria’s commercial city. It’s NGN565 and NGN550.
Before 2021 ended, demand for forex was higher than supply at the parallel market, thereby pushing it to NGN570/$1 on December 20. It traded at NGN565/$1 in the earlier week.
The margin may be considered again for the troubled Nigerian currency, it’s however not significant considering how NGN fell heavily since the removal of BDCs from the forex value chain by Nigeria’s apex bank in July 2021.
The best performance Naira pulled was NGN525/$1 on November 12, 2021, while the worst was NGN575 since the new CBN forex policy
Blackmarket rate is unofficial
The black market rate or street market is characterised by the power negotiations between the seller and buyer.
The Central Bank of Nigeria (CBN) has consistently maintained that the parallel market should not be used to determine Nigeria’s foreign exchange rate, while some financial analysts stated that the CBN has been over-valuing Naira as the official price doesn’t align with the rate Nigerians get it at the banks.
For instance, banks do not have a unified price, thereby making the official market rate questionable or showing a slack in the efficiency of the regulator to check the excesses of the banks.
P2P Exchange Rate
On P2P, the exchange rate was between NGN564 to NGN564.50
New Year Demand:
New year demand is likely to create more scarcity in the market when trading resumes Monday, January 3, 2022. Although the CBN doesn’t recognise the parallel market, most of the customers who couldn’t access the forex at the official market patronised the unofficial market in the past.
“I expect a bit of demand next week which could push naira down,” Reuters quoted one trader as saying. For instance, the rationing of forex at the official market plus delay continue to push many people to the black market.
“It’s been two weeks since I submitted my application for an education fee on the Trade Monitoring System (TRMS), there is no response from my bank if my application was rejected or approved,” a Nigerian who wished to pay for foreign school fees said.
A lot of factors are responsible for the poor performance of the naira which include spending up to 40 per cent of its reserves on fuel importation, the reliance of Nigeria’s economy on the importation, and defending naira with the foreign reserves among others.