Key Points

• Naira plummets to N1,780/$1, erasing recent gains.
• Traders and IMTOs quote rates as high as N1,745.
• Experts warn forex volatility could increase inflation and instability.

On the black market, the value of the naira fell sharply from N1,600 a day earlier to N1,780 per US dollar on Wednesday.

In the midst of ongoing foreign exchange reforms, the abrupt fall has erased recent gains and sparked worries about the stability of Nigeria’s currency.

Naira plummets to N1,780/$1, erasing recent market gains

BusinessDay was informed by a Bureau de Change (BDC) operator that they were purchasing at N1,720 and selling at N1,780 per dollar.

Since the Nigerian Exchange Flow and Monitoring System (EFEMS) was implemented, this is the second time in a row that the value of the naira has declined. The naira has already lost N200 in just two days, with a quotation of N1,580 per dollar on Monday in the parallel market.

Market players and traders are worried that the naira’s steep drop suggests that last week’s gain may have been fleeting. International money transfer providers (IMTOs) listed rates as high as N1,745 per dollar on Wednesday, while dealers gave varying quotes, with some quoting N1,715 per dollar.

With quotes of N1,728 and N1,736 per dollar, respectively, stock trading platforms Grey and Trove mirrored the volatility. These swings demonstrate how unpredictable the parallel market is becoming and how it keeps deviating from the official currency rate.

Significant economic effects are anticipated from the naira’s depreciation, especially with regard to inflation, import prices, and consumer purchasing power. In a nation already struggling with a high cost of living, the rising dollar for importers may result in increased pricing for goods and services, which might feed inflation.

Forex volatility sparks inflation fears and economic instability

According to experts, the black market’s volatility highlights the strain on Nigeria’s foreign exchange market, particularly while the Central Bank of Nigeria (CBN) keeps enacting measures meant to harmonize official and black market rates.

Although the EFEMS system was designed to increase efficiency and transparency, it is unclear how it will affect the stability of the naira.

Financial experts and industry players have called on the CBN to take more decisive action in response to the abrupt decline in the value of the naira.

Clear rules to address speculative trading and demand-supply mismatches are necessary, according to analysts, to rebuild market confidence.

A prolonged decline in the value of the naira may further undermine investor confidence and increase uncertainty for individuals and companies. All eyes are on the CBN’s next moves to stabilize the market as Nigeria pursues its forex reforms.