With the current dollar scarcity in Nigeria, the naira exchange rate has depreciated to a jaw-dropping level of ₦385/$1 and ₦505/£1 in the unofficial (black) market.
In January, the Nigerian Stock Exchange (NSE) recorded a whooping ₦1.2 trillion loss and by a couple of weeks it graduated to a ₦1.22 trillion loss; market capitalization went down by 12.36%. The institute also witnessed the cumulative loss of ₦430 billion in just 2 days.
According to reports, naira, the Nigerian currency is at its lowest in years. Earlier in the year, Nigerians shuddered at the shocking ₦305/$1 rate. Now, the official parallel market rate (as at February 16) though stable for inter-banking transactions at ₦197/$1, was at ₦352/$1 which is still on the extreme side for Nigerians. With the alarming level of the ‘naira’ weakness, Nigerian economy is pretty much vulnerable.
A while ago, the Nigerian President Buhari refused to further devalue the naira, but then, more and more Nigerian importers are desperately reacting to the shortage in dollar supply. Explaining the reason for the dollar scarcity,
“Black market operators said that since the apex bank stopped selling foreign currencies to Bureaux De Change, there have been acute shortages in the supply of the resources. The increased scarcity across the market segments was coming at a time it appeared there was demand surge coming from importers, who were unable to source from the CBN window, thereby putting pressure on the little resources available at the BDCs and street markets.”- Vanguard
It appears that the fall of the naira is limitless and in fact unpredictable; it is sure seeming like a helpless situation.
“The naira has depreciated by over 13 per cent in less than two weeks.”- Reuters
The CBN recently-adjusted ‘monthly’ foreign exchange earnings (as against former daily sales) depreciated from US$3.2 billion to US$1 billion; their report last week shows a fall in the foreign exchange resulting to a reserve sum of $27.83 billion.
The NSE which set a target of achieving a market capitalization of ₦200 trillion by 2019 have no other option than to curb their enthusiasm. The Nigerian economy has become so unstable that “you cannot quote any rate for anybody now because the rate is changing every time” (Vanguard).
The direct implication of this is seen in importation-based businesses and of course the oil/energy sector which forms a large percentage of the nation’s economy. Sadly the Nigerian market will have to deal with sky-rocketed leaps in prices of imported commodities since the nation depends largely on importation for her consumer goods.