The exchange rate between the naira and dollar devalued to N848/$1 on the official investor and exporter window on October 17th, 2023. It also traded at a record at an intra-day high of N981/$1.
This is according to data from the FMDQ website which publishes the daily exchange rate on the Nigerian forex exchange market where forex is sold officially.
This is the lowest the naira has ever traded officially. Before now, the lowest the naira had traded officially was N803.90/$1 recorded on the 14th of July 2023, per Nairametrics data.
What the data is saying
A review of the closing rate for October 17th reveals the official exchange rate closed at N848.12/$1 as against N778.80/$1 recorded a day earlier.
The exchange rate also sold for as high as N981/$1 on the official market signifying a major change in the pricing of the dollar at the official market.
Meanwhile, the lowest rate sold on the day was just N758.50/$1.
Total turnover during the day was just $134.28 million.
Meanwhile, at the black market, the exchange rate quoted for around N1,050/$1, while for inflow it was around N1,070/$1.
On the P2P market, the exchange rate quoted for as high as 1,060/$1
The disparity between the official and black market rates (which was 26%) suggests the central bank will have no choice but to allow the official rate to devalue to close the gap.
The current devaluation on the official market suggests the disparity has now closed to 18.8%, still relatively higher than the acceptable band of around 5%.
Back story
Last week, the central bank lifted the ban on 43 items imposed under the Godwin Emefiele CBN era.
The central bank also stated that it will also boost liquidity in the Nigerian Foreign Exchange Market and intervene from time to time, stating that interventions will decrease as liquidity improves.
A few days later, the apex bank released an “FAQ” suggesting that widening disparity between official and black market exchange rates was due to the 43 banned items implemented in 2015.
It appears the closing rate achieved on Tuesday could be a sign of things to come in the evolution of the new forex market.
Floating Naira
The apex bank unified the naira back in June, adopting what it referred to as a managed float exchange rate.
However, since then, the exchange rate had oscillated between N740-N775/$1 as the parallel market weakened, establishing a disparity of around 26%.
By design, the official window is meant to depreciate in line with the dictates of demand and supply. However, the disparity gave traders the impression that the official rate was artificial, dissuading diasporra remittances from remiting via official channels.
A further depreciation over the next few days will mark a major turning point in the exchange rate crisis that has hit Nigeria over the last two years.
-Nairametrics
