The Nigerian foreign exchange (forex) market is grappling with a persistent supply shortage as the local currency, the Naira, plummeted to a new low over the weekend.

The local currency traded at N803.9 to a dollar in the Investors & Exporters (I&E) window, which serves as the official forex market, and N822/$ in the parallel market during the weekend. Suggesting persistent foreign exchange illiquidity across the nation’s main forex segments.

Checks by Investors King show a 6.6 percent decrease in the volume of dollars traded in the I&E window, leaving dealers disappointed by the lack of anticipated supply increase last week.

Comparing the previous week’s rates, the parallel market witnessed a 5.5 percent depreciation, reaching N822/$ from the previous N779/$ closing rate. Similarly, in the I&E window, the Naira depreciated by 3.9 percent week-on-week, settling at N803.9/$ from the previous rate of N776.9/$ on Friday.

Research shows that following market reforms implemented by the Central Bank of Nigeria (CBN), the exchange rate has remained volatile, experiencing daily fluctuations until it hit a new record low over the weekend.

The implemented reforms primarily aimed to eliminate multiple exchange rates and reintroduce the ‘Willing Buyer Willing Seller’ market model in the I&E window.

However, since the introduction of these measures, the Naira has cumulatively depreciated by 70 percent (N321.23) and 7.0 percent (N58) in the I&E window and parallel market, respectively.

Also, the closing rate from last week indicates that the margin in the parallel market, which had initially narrowed following the new policy, has now begun to widen.

Ahmed Danjuma, a parallel market operator in Lagos Island, stated, “People are demanding the dollar. It is not easy to get dollars from the bank because it is very scarce. The supply is very low. Even Bureau De Changes have little access to the foreign currency.”

Similarly, Umoru Mohammed, a parallel market operator in the Ikotun area of Lagos, noted, “Dollar was very scarce today (last Friday) as we could hardly have access to it even from the banks. Every day, the demand for dollars increases, but the supply is very little. This is really hindering business, especially for transactions requiring dollars.”

Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria (ABCON), expressed his concern over the situation, stating, “The situation is tough; it even traded at N822 in some segments today (last Friday). You know now the restrictions have been removed; there is also competition and a surge in demand. Most people are still holding assets in dollars, and we have not seen significant inflows even from the side of the investors.”