The Nigerian Naira has experienced a decline against the US Dollar on the parallel market due to a surge in demand within the informal sector. This situation has caused a widening gap between the parallel market and the official market, where currency trading is restricted. Despite this, it’s worth noting that this trend doesn’t completely align with the performance of the US Dollar index this year. Specifically, the Naira weakened to an exchange rate of N930 per Dollar in the parallel market on Thursday, August 10, 2023.
This drop was exacerbated by the inability of Nigerian banks to meet the rising demand for dollars, prompting buyers to turn to the parallel market. Additionally, the Naira is under pressure as many middle and high-income individuals are using the US Dollar as a means of preserving value. Interestingly, recent movements in the US Dollar index chart show a disconnect with the Naira’s performance. The US Dollar lacked a clear long-term trend and is presently consolidating within a range. Conversely, the Naira has lost more than 50% of its value in 9 weeks.
In an interview on Wednesday, the Chairman of the Bureau De Change Operators, Alhaji Aminu Gwadebe, called for a ban on the cryptocurrency platform Binance, citing its growing influence as the anchor for determining the exchange rate.
- “If you know about Binance, you will know that Binance trading is becoming the anchorage of both the investors and exporters window and the parallel market, which is unfortunate.
- So, we have to do something that can stop Binance. It’s a competition; we need to ban Binance and the only way to do so is if you have liquidity.
- As I speak, Binance is the most liquid market; they do 1.2 million transactions per second. So it’s a very liquid market but that is not a scary status, we can break it through our local content and peculiarities.” Alhaji Aminu Gwadebe
The exchange rate between the naira and dollar plummeted to as low as N930/$1 on the parallel market. The naira has now weakened by 4.43% in the first 9 days of August on the parallel market. The exchange rate weakened by 11.5% in the whole of July 2023.The exchange rate had crossed N900/$1 for the first time, an all-time low. However, higher demands have continued to pile pressure on the exchange rate as bidders are made to bid higher.