The intensified foreign exchange has triggered the further depreciation of the naira to N385 per dollar in the Parallel (unofficial) currency exchange market on Wednesday.
This implies the naira has depreciated by N60 against the dollar this week in the market, when compared with the closing exchange rate of N325 and N345 per dollar on Friday last week.
However, the naira remains stable at the official interbank foreign exchange market as the interbank rate closed N199.34, yesterday. Thus, the gap between the interbank and parallel market rates widened to N185.66 per dollar from N127.53 last Friday.
Investigation also reveals that the naira depreciated against the British pounds to N505 per pounds in the parallel market, yesterday, implying N65 depreciation when compared with the closing rate of N440 last Friday. The sharp depreciation of the naira in the parallel market this week, as investigate shows, is due to increasing demand by importers sourcing dollars to pay for imports from China.
According to a Bureau De Change (BDC) operator, who spoke on condition of anonymity;
“You know China had been on its one month annual holidays. But they resumed work on Monday, and people have to complete payment for goods ordered before the holidays.
“They had made 30 per cent down payment to order the goods and they now have to pay the 70 per cent balance otherwise they will lose the 30 per cent.That is why they are desperate and ready to buy dollars at any rate. Meanwhile, supply is scarce and those who have dollars are not willing to sell because they might also need the currency soon.”
Prior to this newest decline, the naira was traded at N265/$1 in the parallel market. The currency has been on steady decline since Tuesday, January 12, 2016, when the Central Bank of Nigeria (CBN) stopped weekly dollar sale to BDCs, consequently causing the naira to plummet further by N80 in the parallel market.
The naira’s steady depreciation was also aggravated by inability of the CBN to meet foreign exchange demand.
And now, the parallel market is being bedeviled with demand for foreign exchange by importers of the 41 items excluded from the official market by CBN last year as well as importers of items not excluded from the official market.