The value of the naira plummets, and the black market dollar rate rises above N1,000.

A dollar yesterday changed hands for more than N1,000 on the black market, signalling a worsening of the country’s foreign exchange crisis.

According to a survey conducted by Daily Trust, the naira closed at N738 at the Investors & Exporters Foreign Exchange (FX) window yesterday, but on popular black markets in Lagos, a dollar was exchanged for between N1,000 and N1,050 in the early hours before settling at N990 in the evening.

The Central Bank of Nigeria (CBN) announced in June that it would be unifying all parts of the foreign exchange markets, including the official and parallel markets.

However, according to merchants, demand for goods on the black market has persisted in spite of the unification policy because of a lack of US dollars on the official market.

“There is scarcity at the market,” Ismail Muhammed, one of the proprietors at Allen Roundabout, said.

Dollars were sold for N1,000 earlier in the day, but we’re now buying them for N990. He said that some people had traded it in for N1, 050.

According to Alhaji Abdullahi Olugbede, another businessman in the industry, the shortage of dollars is to blame for the recent uptick.

We are not pleased that a shortage causes the dollar to strengthen against the naira. This is not good, so we should pray for it to decrease,” he said.

Negative ramifications — Qualified Individuals

The experts have warned that the black market devaluation of the naira will have devastating effects on the economy.

Godwin Oyedokun, a professor of accounting and financial development at Lead City University, Ibadan, said the situation would make it more challenging to do business in Nigeria.

I am not in the country at this time. Let me give you an example: I went to a convenience store in Jordan today to buy a can of Coke. If the dollar is equivalent to N990 in Nigeria, then I could purchase the same can of Coke for nearly N2,000. The weakness of our currency is to blame for this situation.

For example, if the exchange rate between the dollar and the naira is 1 to 1, the implication is that Nigerians will spend as much as N990,000 on goods that were previously worth N300,000. That’s why it’s so challenging to conduct business as usual. He predicted that as the economy as a whole readjusted, commodity prices would rise.

However, according to the tax and forensics expert, if the government adopts the appropriate policies and increases local production, the naira’s value will rise and Nigeria will earn more foreign currency.

The current government is implementing the necessary policies to address this, and we also have goods that we can export to bring in foreign currency. To finally have our own nation, the finance minister and the new CBN governor will need to consider how best to coordinate the country’s fiscal and monetary policies. You might be interested to know that one Jordanian Dinar is equivalent to about $1.41 in US currency. “The pressure on the naira will ease if we get the policies right,” he said.

Among other things, it will affect inflation, as the economy is very sensitive to changes in the exchange rate, according to Dr. Muda Yusuf, an economist and former Director General of the Lagos Chamber of Commerce and Industry (LCCI).

To put it mildly, the implications are negative because they highlight the fact that we still face fundamental challenges that are influencing the exchange rate. The size of the parallel market and the share of economic activities supported by it need further investigation.

Because “every time we talk about the exchange rate, people don’t even talk about the official rate anymore, we just talk about the parallel market,” he said, “we need that research, we need that data.”

He went on to explain how the rising costs of diesel and petrol would affect various industries. Fuel prices would be over N800 per gallon right now if the president hadn’t recently said that NNPC should hold on to their profits.

Dr Muda, CEO of the Centre for the Promotion of Private Enterprise (CPPE), speculated that factors such as money laundering were contributing to the naira’s depreciation.

Since this speculative attack on the naira is starting to look anything but routine, I believe that there are some factors that we have overlooked in our analysis. How many factories can keep buying dollars at this rate? This has me worried that there may be a sizable amount of illicit funds contributing to the Naira’s depreciation. But despite the price increases, demand remains high. How many people who have real money or resources are capable of doing that? Money laundering may be a factor, he speculated; “people may have large sums of naira they wish to convert to dollars.”

He warned the government against abandoning the unification policy, despite the fact that current pressures have defied the predictions of many economists at the time the policy was introduced.

The situation will only worsen if the government continues to chase the parallel rate at this time. This means that the official rate must be raised from its current N700+ to either N800 or N850. Many of us made a forecast, but the current situation is not responding as we expected. This is not the effect we expected convergence to have, given that, intuitively, it should promote more inflows and reduce demand.

Abiola Rasaq, a financial analyst, has predicted that the positive outlook for oil price will strengthen the naira against the dollar, despite the fact that he acknowledges that the backlog of demand in the system continues to put pressure on the currency.

Due to low levels of independent FX supply and persistently high levels of demand, the market is still speculative. Furthermore, the demand backlog in the system still exerts pressure on prices. Interestingly, the seasonal Q3 demand cycle is almost over, so the naira should see some relief soon. While foreign exchange (FX) supply may remain weak, moderate demand should help ease the pressure and provide relative stability to the naira for the rest of the ember months, particularly if the government’s efforts to boost oil exports bear fruit.

He predicted that the Nigerian currency would strengthen in the coming months because of rising exports of commodities other than oil.

Olayemi Cardoso, a banking executive and former civil servant, was recently nominated by President Bola Tinubu to take over as governor of CBN.

Deputy governors Emem Nnana Usoro, Muhammad Sani Abdullahi Dattijo, Philip Ikeazor, and Bala Bello were also nominated and approved by Tinubu; they will serve for a term of five years once confirmed by the Nigerian Senate.

Godwin Emefiele, the former governor of the CBN, was suspended in June and has been in detention since then. It is unknown whether or not he has resigned.