This is the result of the foreign exchange regime being liberalized, which marks a significant divergence from the situation during the presidency of President Muhammadu Buhari.

The World Bank, other organizations, and experts in banking, finance, and economy stated at various points during the previous administration that having an official and parallel value for the naira was harming the economy while also allowing a small group of privileged individuals to amass billions of dollars without doing any work because they obtain foreign exchange from the CBN at the official rate and immediately sell it at the black market.

Recall that during his inauguration on May 29, 2023, President Tinubu had said, “Monetary policy needs a thorough house cleaning. The Central Bank must work towards a unified exchange rate. This will direct funds away from arbitrage into meaningful investment in the plant, equipment and jobs that power the real economy.”

The segmentation of the foreign exchange market into several windows was removed by the CBN on June 14, 2023, and deposit money banks were instructed to allow the naira to freely fluctuate against the dollar and other foreign currencies.

In contrast to prior practice, when CBN set prices, buyers and sellers of foreign currency in the official FX market were subsequently permitted to quote their preferred rates.

Whether on purpose or accidentally, the naira has subsequently kept falling at the parallel market.

The exchange rate for cash exchanges was as high as N915 to $1, according to foreign exchange trader in Abuja yesterday.

In Lagos, the commercial hub of Nigeria, the dollar was equivalent to N880 and N890.

Meanwhile, in the official Investor and Exporter Window, the exchange rate closed at N757.81/$1 while the NAFEX rate was N776. The official market also faces supply constraints, with daily turnover averaging $80 million since July.

The peer-to-peer market, where cryptocurrency traders exchange forex, also saw the exchange rate soar above N900/$1.

The exchange rate between the naira and dollar has weakened by 19.8% since the reunification of the exchange rate windows. This compares to a depreciation of 2.5% between January 1 and June 14th (before the unification). The exchange rate weakened by 22.9% in the whole of 2022.

The disparity is now N153/$1, one of the widest since the unification of the naira on June 14th, 2023.

The naira has been under pressure in the parallel market for several weeks, as the supply of forex from official sources remains inadequate.

On July 1st, the beginning of the second half of the year, the exchange rate in the parallel market was around N772/$1.

However, a surge in demand from various segments of the economy, such as importers, foreign travellers and speculators, has triggered exchange rate volatility.

Some forex traders who attributed the depreciation of the naira to a scarcity of supply.

They said that there were more buyers than sellers in the market and that the situation was unlikely to improve anytime soon.

A forex dealer, Nura Usman who spoke with Daily Trust that it was scarcity and lack of price control mechanism that was responsible for the astronomical rise in the exchange rate and the huge gap between the official and parallel markets.

“Even commercial banks do not have dollars, they come to us to look for it when their customers ask for it. So, this makes you wonder why CBN is not contributing its quota to the market. If the CBN releases dollars to the commercial banks at the I&E price, definitely the gap between the I&E market and our own (parallel) won’t be more than N10 and not the over N160 that we currently have,” he said.

Usman added that the chances are very high that a dollar will go above N1,000 sooner than anticipated if nothing was done to quickly address the scarcity.