Naira Crashes to N1,745/$ in Parallel Market Amid Forex Volatility

De-dollarise Economy Naira

The exchange rate between the naira and the US dollar fell to approximately N1,745/$1 on the parallel market on Wednesday, marking a sharp decline from the N1,600/$1 levels recorded at the end of last week.

On various platforms, peer-to-peer (P2P) exchanges quoted rates as low as N1,715/$, while some International Money Transfer Operators reported rates closer to N1,745/$. Stock trading apps like Bamboo and Trove displayed rates of N1,730/$ and N1,736/$, respectively.

In the official market, the naira depreciated further, closing at around N1,545/$ on Wednesday—a 1.31% drop from the previous day’s rate of N1,525/$.

The black market saw significant volatility, with the naira settling at N1,685/$ among Bureau de Change operators, down from N1,630/$ recorded a day earlier. This disparity has widened the gap between official and parallel market rates to about N140, highlighting ongoing challenges in aligning central bank-regulated rates with the unofficial trading environment.

EKO HOT BLOG reported that the naira had gained N137.69 against the dollar within a week, following the Central Bank of Nigeria’s (CBN) introduction of a new foreign exchange platform. Data from the CBN showed that the official exchange rate, which closed at N1,672.69/$ on Friday, November 29, 2024, appreciated to N1,535/$ by Friday, December 6, reflecting an 8.24% gain.

Despite rapid gains in the official market, the parallel market experienced significant fluctuations. By the end of last week, the naira was trading at N1,570/$ on the parallel market, recovering from N1,700/$ earlier in the week. Over the weekend, the naira surged to N1,530/$ on Saturday morning before stabilizing at N1,580/$ on Sunday.

This recent recovery is attributed to the operationalization of the CBN’s new FX platform, which has brought more transparency and liquidity to the forex market. Analysts have noted that this mechanism has helped narrow the gap between official and parallel market rates while stabilizing the naira.

However, as this week unfolds, the gains appear to be fading in the parallel market, underscoring the volatility in Nigeria’s forex landscape. Members of the Organised Private Sector have urged the CBN to sustain the naira’s recent momentum, emphasizing its potential economic benefits.