Naira Firms to N695/$1 at Black Market as External Reserves Shrink by 0.65%

By Dipo Olowookere

The Nigerian Naira firmed against the United States Dollar at the parallel market on Friday afternoon by N45 or 6.08 per cent to trade at N695/$1 compared with Thursday’s exchange rate of N740/$1.

This was buoyed by slowing demand for the greenbacks in the unauthorised segment of the foreign exchange (forex) market during the trading session.

On Wednesday, October 26, 2022, the Central Bank of Nigeria (CBN) disclosed that it was planning to redesign the N200, N500, and N1,000 notes.

Addressing newsmen that day, Mr Godwin Emefiele, the Governor of the central bank, said the new banknotes would be introduced into the financial system on Thursday, December 15, 2022, emphasising that the old notes would be rejected for financial transactions from Tuesday, January 31, 2023.

This triggered panic in the FX market as those who had kept the Naira notes brought them out, and to avoid the prying eyes of authorities, they boycotted the commercial banks and thronged the forex market to buy Dollars.

This put pressure on the local currency and gave currency dealers room to manipulate the exchange rates, with the Naira exchanging above N900/$1 in the parallel market.

To curb this, the Economic and Financial Crimes Commission (EFCC) went after the currency traders, while the CBN increased FX supply into the official market window to discourage the services of black marketers.

This is reflected in the balance in the country’s external reserves, which shrank by $242 million or 0.65 per cent within two weeks of the announcement.

According to data harvested by Business Post from the central bank, the FX buffers of Nigeria depleted to $37.247 billion as of Wednesday, November 9, 2022, from $37.489 billion on Wednesday, October 26, 2022.