The Nigerian naira continues to weaken on the black market as the local currency traded near N1000 per Dollar on Thursday just two months after President Bola Ahmed Tinubu floated the currency to improve capital importation.
The Naira declined to N955 against the United States Dollar from about N800 it traded last week.
Escalating demand for dollars coupled with banks’ inability to meet these demands has propelled individuals and businesses to increasingly rely on the black market and subsequently the widening gap between the street rate and the official exchange rate.
In June, Nigeria’s central bank initiated measures to loosen foreign exchange controls in order to allow market forces to determine the local currency’s appropriate exchange rate against its global counterparts. This initiative resulted in a 40% decline in the Nigerian Naira.
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However, rising demand has led to the persistent decline of the currency. According to FMDQ OTC Securities Exchange, the official rate stood at N782.38 to the dollar on Thursday while on the black market the Dollar is N955.
Umar Salisu, the bureau de change operator, highlighted the surge in demand for dollars in anticipation of the upcoming Christmas season sales and international vacations.
He noted that buyers are increasingly turning to the black market due to their frustration with banks’ inability to meet their dollar requirements.
The scarcity of dollars has roots in the legacy of the Nigerian government’s previous currency controls aimed at curbing excessive dollar demand. As these constraints were lifted, the market faced a substantial backlog of unfulfilled dollar requests, contributing to the ongoing scarcity.
The persistence of the naira’s decline and the thriving black market underscore the challenges that the Central Bank of Nigeria faces in stabilizing the exchange rate and managing the burgeoning dollar demand in the country.