The naira witnessed a decline in value yesterday, exchanging at N1,534.39 to the dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) – the official market.
The exchange rate dropped to N1,490 to the dollar at the parallel market, with traders anticipating further weakening amid exacerbating dollar shortages.
“This is the second time in many months that the official exchange rate has been weaker than the parallel market rate,” the report stated.
Earlier on January 30, the naira was pegged at N1,482.57 to the dollar at the NAFEM – the official market, before depreciating to N1,460 to the dollar at the parallel market due to persistent dollar scarcity.
Persistent dollar shortages have led to the ongoing depreciation of the local currency across both official and parallel markets. Importers are encountering challenges securing necessary funds from both markets, affecting legitimate needs such as Form A applications for Business Travel Allowance (BTA), Personal Travel Allowance (PTA), school fees, and medical fees, as well as Small and Medium Enterprises (SMEs) utilizing Form Q.
A street trader highlighted the scarcity, stating, “The problem is that dollars are scarce in the market. People are not bringing dollars and demand is so high that is why the price is going up.”
Richard Obire, Former Executive Director at Keystone Bank Limited, emphasized the need to reverse Nigeria’s heavy reliance on imports, particularly food and energy, to safeguard the naira. Additionally, he stressed the necessity of addressing corruption-driven capital outflows hindering Nigeria’s productive capacity.
Obire proposed short-term measures to strengthen the naira, including non-market-damaging strategies to increase the supply of hard currencies and reduce demand. He urged urgent action to address insecurity hampering food production and advocated for pragmatic incentive programs to boost domestic food production and industrial utilization, thereby reducing the food import bill.
Additionally, he recommended suspending all government consumption expenditures requiring hard currencies indefinitely.