The Nigerian Naira fell to N604/$ at the parallel from N565 at the start of the year. This is consistent with an N39 loss YtD.
This is based on information acquired from Nigerian BDCs, who attribute the increase in dollar demand to the election season as politicians stocking up on dollars before Nigeria’s primary elections start over the weekend.
Despite international calls for the Naira to be completely floated, the Central Bank has maintained its managed float approach. As a result, Naira’s crash in the black market has widened the gap between the official Investors and Exporters (I&E) window and the black market.
Through intervention supported by external reserves, the CBN fixes the exchange rate in the I&E window at around N418. The difference between the I&E and the black market has expanded by N188 as the Naira continues to decline.
What experts are saying
The volatility in the FX market, according to Anwar Usman, a BDC operator in Lagos, is due to a shortage of forex supply, while demand has risen sharply in recent weeks.
He said, “Dollar demand has increased significantly, especially since the election is fast approaching, which is why the exchange rate has gone up.”
Idayat Hassan, director of the Abuja-based Centre for Democracy and Development stated that Politicians in Nigeria have a history of buying votes at party primaries going as far back as the 1993 elections..