On Monday, the naira hit a three-month low of N1,530 per dollar in the parallel market, commonly known as the black market. This decline is attributed to renewed pressure on demand for the U.S. dollar from end users, particularly travelers and importers.
Market Dynamics
The naira’s value fell by 0.65 percent (N10) compared to N1,520 quoted on the previous Friday. On March 19, 2024, the local currency was quoted at N1,570 per dollar, according to data from online platforms and street traders.
A street trader in Lagos informed BusinessDay, “The dollar’s value has risen due to increased demand from travelers and importers. Currently, we purchase dollars at N1,520 and sell them at N1,530.”
Official Foreign Exchange Market Performance
Contrary to the parallel market, the naira gained 0.70 percent on Friday in the official Foreign Exchange (FX) market. The week ended calmly, with the dollar quoted at N1,509.67 compared to N1,520.24 on Thursday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from the FMDQ Securities Exchange Limited.
Trading Volumes
The dollar supply by willing buyers and sellers decreased significantly by 32.64 percent, falling to $116.88 million on Friday from $173.51 million recorded on Thursday. This reduction in supply reflects a tightening in the FX market, contributing to the naira’s depreciation in the parallel market.
Intraday Performance
On Friday, the intraday high for the dollar closed at N1,535, down from N1,550 on Thursday. The intraday low was quoted at N1,450, compared to N1,430 the previous day. These fluctuations indicate ongoing volatility and pressure within the foreign exchange market.
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Conclusion
The naira’s decline to a three-month low on the parallel market underscores the challenges faced by Nigeria’s currency amid increased demand for the dollar. While the official FX market showed some gains, the overall pressure on the naira persists, driven by factors such as travel and import needs. This situation highlights the complexities of managing currency stability in the face of fluctuating demand and supply dynamics.