According to Fitch Ratings Inc., the government’s inability to stabilize the currency and the possibility that it would continue to devalue are both indicated by the expanding disparity between the official and black market exchange rates of the Nigerian naira.
According to Umar Salisu, a foreign exchange operator who gathers the statistics in Lagos, the nation’s commercial center, the naira was quoted at 1002 to the dollar on Wednesday at the parallel market. However, the official window rate was 26% higher at 745.19 naira to 1 dollar, according to FMDQ, a Lagos-based trading platform for the currency.
Since the central bank refrained from expanding the supply of the dollar through the official window, where the exchange rate has been extremely volatile, the naira has fallen significantly in street trade during the previous two weeks. On Wednesday, the exchange rate for three-month Naira non-deliverable contracts reached a new high of 821.38 to the dollar.
Olayemi Cardoso, the recently appointed governor of the Nigerian central bank, has not yet indicated his preferred course of action. Last week, legislators approved Cardoso for the job.
The difference between the rates on the parallel market and the official market “highlights the challenges in sustaining exchange-rate liberalization and raises the possibility of a further devaluation,” according to a statement from Fitch Ratings sent via email.
The most populous country in Africa permitted a 40% decline in the value of its currency against the US dollar in June as a result of measures intended to draw in foreign investment and boost the economy. Prior to the spread re-widening in August, under pressure from insufficient official dollar supply, the devaluation and currency reforms momentarily combined the official and parallel market rates. Before Nigeria started its currency reforms, there was a 70% difference between the official rate and the rate on the black market.