The naira is gradually gravitating towards the N1000 mark as it closed at N985 against the dollar on Wednesday in a sign that dollar supply is drying up in the foreign exchange market due to a dwindling supply of dollars from the Central Bank of Nigeria (CBN).

The development, which is the lowest level the dollar has sunk in recent time, has compelled buyers to seek the hard currency on the streets, exacerbating the currency’s depreciation.

The naira was exchanged at a rate of N970 per dollar in the morning while it closed trading at N985.

This marks a decline from the previous day when it was at N962 per dollar and a substantial drop from the N903 per dollar rate at the beginning of the month.

The exchange rate briefly touched N1000 against the dollar on the parallel market before strengthening back to close at N865 on Monday as dealers were stuck in a one-way track ahead of a more-anticipated monetary policy meeting next week.

The CBN three months ago allowed the naira to float in a bid to unify the multiple exchange rates and to lure foreign investment to shore up liquidity in an economy struggling with dollar shortage.

As expected, the self-induced devaluation initially helped narrow the gap between the naira’s exchange rates on the official window and the black market but pressure is gradually building up, especially from individuals paying for expenses abroad.

The naira has been swinging widely on the official market since the devaluation as it touched a new low of N776.60 on Wednesday at the official market, according to FMDQ.

The inability of the CBN to meet the official market demand has driven many towards the black market, causing prices to surge due to unprecedented demand for the currency and as a result, there is a wide gap between the two markets.

This alarming rate is approximately 20 percent weaker than the official exchange rate of N776.60 per dollar, as reported by FMDQ, a Lagos-based platform.

The naira has further depreciated, now standing at an alarming rate of N1000 per US dollar on the black market. This decline underscores the pressing challenges facing Nigeria’s foreign exchange market and its impact on the local currency’s value.

The reasons behind this depreciation may include a shortage of foreign currency reserves, reduced oil revenues (a significant source of foreign exchange for Nigeria), and economic uncertainties. These factors, among others, contribute to the naira’s struggle in the foreign exchange market.

The implications of this currency depreciation are far-reaching, affecting various sectors of the economy and the purchasing power of Nigerians. It highlights the need for effective monetary and fiscal policies to stabilize the currency and ensure economic stability in the country.

As the situation continues to evolve, both government authorities and financial institutions will need to work collaboratively to address the challenges facing the naira and restore confidence in the currency.

With banks and black market dealers left to source for FX to remain in business, supply seems to have dried up completely, putting end-users in a dilemma. (Daily Independent)

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