Dollar Rises By 21% As Forex Shortage Persists
The dollar-to-naira exchange rate has risen from N500 to N603 at the parallel market, for the past year (Between June 2021, and June 2022).
The increase in the exchange rate shows that the greenback appreciated by 21 percent within the period.
It was learned that the dollar exchanged at N603 (average) at Lagos and Abuja parallel markets on Tuesday, indicating a worsening liquidity crisis in the foreign exchange market of Africa’s biggest oil producer.
The margin between the official and the parallel market rates on Tuesday was N187.28, a situation believed to be fuelling arbitrage and worsening an already bad FX supply situation, The Punch reports.
At the Importers and Exporters (I&E) window, a dollar was exchanged at N415.72, gaining N5.53 in three days. But year on year, the naira weakened by nearly one per cent in relation to the dollar, rising from N411 to N415.72.
Nigeria is experiencing one of its worst FX crises in history due to demand overshooting supply.
The oil price has risen above $110 per barrel in the last two months owing to Russia’s invasion of Ukraine, but Nigeria has failed to increase its earnings from it due to oil theft, low production and an opaque subsidy regime which will gulp N4 trillion this year.
Nigeria’s crude oil earnings are also blurred by the lack of a local refining capacity as much of its FX goes into overseas crude refining.
The country is not earning enough from its non-oil exports either. It earned $45.56 billion in 2021 from crude and non-oil sectors within the same period, according to the National Bureau of Statistics.
The Central Bank of Nigeria has been supplying dollars to the FX market, but this is hitting hard on foreign reserves, which fell to $38.546 billion on June 10, from $39.124 billion on May 10.
In July 2021, the CBN discontinued the sale of forex to BDCs, saying they had become a conduit pipe for illegal FX flows. But it was learned that the decision has worsened the FX crisis and empowered banks.