For the first time in decades, the naira exchange rate at the Investors and Exporters (I&E) window – the official market rate – weakened below the parallel market rate.
The naira depreciated by N107 to close at N770/$1 at the I&E window yesterday, weaker than the N757/$ it exchanged at the parallel market rate.
The local currency, which closed on Friday at N663/$1 at the I&E window, struggled to sustain the appreciation tempo after dollar supply to the market shrank and manufacturers struggled to source it for items not valid for forex access.
Analysts also said Friday’s low closing rate at the I&E window attracted forex buyers interested in getting the greenback at cheaper rates to that segment.
The Central Bank of Nigeria (CBN) unified exchange rates into the I&E window last Wednesday, allowing market forces to determine the exchange rate.
Managing Director of Economic Associates, Dr. Ayo Teribe, said the Bureau De Change (BDC)/ parallel market rate is a reliable indicator of market realities and is stable.
“The volatile price correction in the I&E rate should trigger an equally strong reduction in demand plus an increase in supply in that window.
“That would make the market settle back towards equilibrium in the next few days. I expect the rates to strengthen across all windows before the end of this week.
“I expect the unified rate to move towards N600/$ or stronger in the next week or so,” Teriba said.
Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, noted that in continuation of the fundamental reforms in the forex market, the CBN announced the relaxation of the domiciliary account restrictions, easing limits on cash deposits and withdrawals.