Why currency dealers quoted the dollar at high rate in official market

• The Nigerian currency, the naira, continued its crash in the official market on Thursday, September 5, 2024
• In the Nigerian Autonomous Foreign Exchange Market (NAFEM), the naira crashed to N1,625.79 per dollar
• Black market traders, who sold the dollar at N1,650 per dollar, disclosed that they are facing an acute shortage of FX

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.

The naira crashed to a new low on Thursday, September 5, 2024, following continued volatility in the FX markets.

The Nigerian foreign exchange market recorded a low turnover as dollar supply grew thin in the Nigerian Autonomous Foreign Exchange Market (NAFEM).

FX supply shortages hit the foreign exchange markets as naira falls Credit: Bloomberg/Contributor
Source: Getty Images

Forex supply affects NNPC as naira crashes

Data from the FMDQ Exchange shows that the naira crashed to N1,639.41 per dollar on Thursday, September 5, 2024.

The crash came amid Nigerian National Petroleum Company Limited (NNPC) reporting FX volatility, which it said is hampering the sourcing and supply of petroleum products across the country.

Traders in the official market disclosed that the dollar's demand grew as importers and others began sourcing FX for medicals, school fees, and other needs.

Dollar supply crashes in the official market

Available data shows that traders in the foreign exchange market quoted the dollar at a high of N1,650 per dollar and a low of N1,410.

Foreign exchange turnover slumped to $185.79 million, down from $205.76 million recorded on Wednesday, September 4, 2024.

In the parallel segment of the foreign exchange market, the naira also crashed to N1,650 per dollar as black market demands grew.

Black market traders lament FX scarcity

Black marketers who spoke to Legit.ng complained of a supply shortage, stating that they are also affected by supply shortages in the official market.

Abbas Yishau, a black market dealer in the Ogba area of Lagos, said the dealers sold the dollar at a high of N1,658 before settling at N1,650 towards the evening of Thursday, September 5, 2024.

“We are struggling with currency supply. What usually happens is that when there is enough supply in the official market, the parallel market falls because buyers always prefer where there is enough liquidity as the rate tends to be cheaper.“But the shortage of FX in the official market drives up demand in the black market and subsequently high prices,” he said.

The gap between official black markets grows

Legit.ng earlier reported that signs of another round of naira depreciation have followed increased demand amid a growing supply gap.

On Tuesday, September 3, 2024, the naira deprecated to N1,635 per dollar in the parallel market from N1,625 per dollar it traded on Friday, August 29, 2024.

Meanwhile, data from the FMDQ Exchange shows that the official exchange rate depreciated to N1,611.34 per dollar from N1,598.56 per dollar.

Source: Legit.ng