Naira weakens again due to dollar shortage, market uncertainty
Story by Jessica Mbamah
The naira on Friday depreciated to ₦1,538 per dollar in the parallel market, weaker than ₦1,535/$ recorded on Thursday.
Similarly, in the Nigerian Foreign Exchange Market, the naira slipped to ₦1,503.5 per dollar from ₦1,503/$ on Thursday, reflecting a 50 kobo depreciation.
Data published by the Central Bank of Nigeria on Friday confirmed the official exchange movement.
Consequently, the margin between the parallel market and NFEM rate stood at ₦32/$, unchanged from Thursday.
READ ALSO: Naira ends August with modest gain against Dollar in Nigerian forex market
For the week, the naira appreciated by ₦9.5 against the dollar in the official market.
However, in the parallel market, the local currency lost ₦8, after opening the week at ₦1,530/$.
Nigeria’s economy, heavily reliant on crude oil exports for foreign exchange earnings, is susceptible to global oil price fluctuations.
A decline in oil prices or a drop in production can significantly reduce the country’s foreign currency inflows. Compounding this issue is a high demand for foreign currency, primarily driven by the need to import raw materials and finished goods, and for a range of services, including international school fees and medical tourism.
Over the years, the CBN has implemented various policies to manage these challenges. These have included a dual-exchange rate system, which the government has recently moved away from in an attempt to unify the official and parallel markets.
READ ALSO: Dollar continues to rise against Naira on Friday
Despite these reforms, the parallel market continues to thrive due to a persistent shortage of dollars in the official market, leading individuals and businesses to seek alternative sources.
The current administration’s decision to float the naira has been a major factor in the recent volatility.
This policy, aimed at allowing market forces to determine the currency’s value, has led to a significant depreciation.
Follow the Neptune Prime channel on WhatsApp:
Do you have breaking news, interview request, opinion, suggestion, or want your event covered? Email us at neptuneprime2233@gmail.com
