Demand pressure continued on Friday at the official market, as naira fell to an all time low of N451.50 against the dollar due to shortage of the greenback at the Investors and Exporters (I$E) forex window.
After trading on Friday, the dollar was quoted at the rate of N451.50/$ as against N451.33/$ recorded on Thursday at the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX).
On a year-on-year basis, naira depreciated by 8.13 percent from N414.80 per dollar quoted in December 2021. Week-on-week, the naira weakened by 1.11 percent from N446.50/$1 quoted on Friday last week at the official market.
At the parallel market, popularly called black market, naira relatively remained stable as the dollar was quoted at the rate N745/$1 for the past three trading days.
Year-on-year, naira has depreciated by 23.62 percent from N569 per dollar in December 2021 to N745/$ the current rate on the black market.
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The exchange rate disparity between the official (N451) and the parallel market (N745) stood at N294 per dollar.
Demand for dollars for school fees payments, medical bills, tourism, importation of inputs and other goods are high across major commercial banks.
Faced with limited supply, manufacturers, investors and individuals have resorted to the parallel market to purchase foreign currency. This, in addition to the new policy on Naira banknotes, creates pressure on the Naira across board, FSDH research said in its macroeconomic update for the fourth quarter 2022.
The Central Bank of Nigeria (CBN) on October 27, 2022 announced that higher denominations of the Naira including N200, N500 and N1,000 would be redesigned and introduced into the economy from December 15, 2022 while commercial banks were directed to return existing denominations to the CBN.
“We hold the view that although the intentions of the policy are good, such a sensitive policy requires careful and detailed appraisal, especially in view of the economic realities of weak dollar inflows from investors, crude oil theft, huge pending dollar demand, rising inflation, flood, low financial inclusion, among other factors.
“We believe that if these realities were properly considered, perhaps, a careful approach would have been adopted to achieve the goals of the policy and at the same time prevent a free-fall of the Naira,” the analysts said.
On the over the counter cash withdrawal limits, the report said although developments are still unfolding, such a policy move is expected to create panic. It could also leave millions of individuals, particularly informal traders, stranded, when it becomes operational on January 9, 2023.