The Nigerian naira gained some ground on Sunday, closing at N765 per dollar at the investors and exporters (I&E) window. This was a 1.8 percent increase from the N770 rate recorded on Saturday, according to data from FMDQ Securities Exchange Limited.
Newsflash Nigeria reports that this was the first time in two weeks that the exchange rates at the official and parallel markets converged, following the government’s decision to unify the exchange rate windows.
At the parallel market, also known as the black market, Bureau De Change (BDC) operators said the naira traded between N772 and N775 to the dollar on Sunday.
The naira has been experiencing fluctuations since the Central Bank of Nigeria (CBN) introduced new policies to address the foreign exchange crisis caused by the plunge in oil prices and the impact of the Covid-19 pandemic.
Some of these policies include scrapping a costly petrol subsidy, adjusting the official exchange rate twice in one year.
The CBN has also adopted a flexible exchange rate regime, which allows market forces to determine the value of the Naira.
However, analysts have argued that the CBN needs to do more to unify the exchange rates and improve liquidity in the market.
They have also called for structural reforms and diversification of the economy to reduce dependence on oil revenues and boost foreign exchange earnings.
However, it also has some drawbacks, such as increasing the interest costs on Nigeria’s dollar-denominated debt and reducing the purchasing power of Nigerians who depend on imported goods.
The naira’s exchange rate is influenced by many factors, such as demand and supply, oil prices, foreign reserves, inflation, fiscal and monetary policies, and market sentiments.
As one BDC operator put it: “There is no way you can get a stable rate in the market. If I give you a rate now, in the next hour, it will change again.”