The naira-dollar exchange rate has been a hot topic in Nigeria’s economy for a long time. The naira has been losing value against the dollar due to various factors such as low oil prices, high inflation, and foreign exchange scarcity. In October 2023, the situation became more complex as the black market and the official market showed different trends.
The black market is where the exchange rate is sold unofficially, usually by street vendors or online platforms. The official market is where the exchange rate is determined by the Central Bank of Nigeria (CBN) and other authorized dealers. The difference between the two markets is called the spread.
According to Newsflash Nigeria, the spread widened significantly in October 2023. On Monday, October 23rd, 2023, the naira opened at N1,200/$1 on peer-to-peer (P2P) platforms, which are part of the black market. By noon, some sellers quoted as high as N1,210/$1. On the same day, the official rate closed at N793.34/$1, compared to N808/$1 reported at the end of the previous week.
The next day, the gap increased further. Some traders quoted inflow rates (for wired transfers) at about N1,300/$1 while cash transactions were quoted for N1,240/$1 on the black market. The P2P rate also closed at about N1,220/$1. Meanwhile, the official rate remained stable at around N790/$1.
The intra-day high and low for the official rate were N900/$1 and N788.49/$1 respectively, as the market recorded a turnover of $81.55 million. The intra-day high and low for the black market were not available, but they were likely much higher and lower than the official ones.
The minister of finance and coordinating the economy, Mr. Wale Edun, said that around $10 billion of forex inflows is expected within weeks rather than months. He made this statement during a panel session at the ongoing Nigeria Economic Summit. He explained that this would come from various sources such as NNPC, increased production, reduced expenditure, forward sales, and sovereign wealth funds.
He said,
“In addition, from the supply of foreign exchange through NNPC, increased production, reduced expenditure, from transactions such as forward sales, from our discussions with sovereign wealth funds, that are ready to invest and provide advanced alongside that investment, there is a line of sight of $10 billion worth of foreign exchange in the relatively near future in weeks rather months.”
This could help stabilize the foreign exchange market and improve liquidity. However, it remains to be seen how this will affect the naira-dollar exchange rate and whether the spread between the black market and the official market will narrow or widen further.
