Naira Weakens at Official FX Market, Strengthens in Parallel Black Market – In a day of contrasting performances, the Naira fell by 1.48% in the official foreign exchange market on Wednesday, even amidst signs of increased dollar liquidity. Data from the Financial Market Derivatives Quotations (FMDQ) reveals that the US dollar was quoted at N756.21 at the close of trading in the Investors’ and Exporters’ (I&E) forex window, marking a decline from the N745.19 quoted the previous day.
The depreciation of the Naira in the official market is attributed to a surge in dollar demand, which overshadowed the slight uptick in foreign exchange liquidity. Wednesday’s market activity saw a noteworthy 17.97% increase in daily foreign exchange market turnover, rising to $95.70 million from the $81.12 million recorded on Tuesday. Despite the influx of dollars from willing buyers, the market faced a supply shortage as the demand outpaced the available supply.
Conversely, the Naira exhibited resilience in the parallel (black) market, where it strengthened against the dollar by the day’s end. Closing at N1,000 against the dollar on Wednesday, the Naira gained N5, improving from its morning rate of N1,005. This strengthening in the black market comes as demand for dollars moderated, allowing the Naira to recover some ground.
The parallel market had previously witnessed the Naira gaining 0.79% (or N8) over the dollar as trading resumed following the Independence Day holiday. With the market opening at N1,000 against the dollar on Tuesday, there was a slight improvement from the N1,008 rate observed last Friday.
As the foreign exchange market continues to navigate through a period of dollar shortage and ongoing economic challenges, the Naira’s performance remains uncertain and subject to various domestic and international pressures. Financial analysts and market watchers are closely monitoring the developments, with some predicting further weakening of the Naira amidst a backdrop of a precarious dollar supply and demand balance.
For further details and ongoing coverage of the Naira’s performance in the foreign exchange markets, readers are encouraged to follow subsequent reports and analyses provided by our experienced financial correspondents.