Naira set to hit N1000 per Dollar As CBN Give Reason for Massive Fall
A significant economic event sent shockwaves through Nigeria on August 10, 2023. The Nigerian naira, the country’s currency, experienced an unprecedented decline, hitting an all-time low of N930 to the US dollar. This historic drop was triggered by a sudden surge in demand for the dollar on the unregulated black market, resulting in a substantial devaluation of the naira.
The naira’s value plummeted dramatically on August 10, 2023, reaching N930 for every US dollar. This marked an alarming milestone, as the naira reached its weakest point in history. The cause of this rapid depreciation was the heightened demand for the dollar, particularly by importers and other users. This increased demand placed immense pressure on the naira’s stability and contributed to its historic downfall.
The absence of intervention by the Central Bank of Nigeria (CBN) exacerbated the currency crisis. Black Market dealers reported soaring rates, with some quoting exchange rates as high as N930 for one dollar. This was in stark contrast to the N910 rate quoted just a day before on August 9, 2023. The scarcity of US dollars was a major factor cause of the market’s instability, leaving dealers struggling to source sufficient dollar reserves.
Dealers also provided insights into their trading practices, revealing that they bought dollars at N920 per dollar and subsequently resold them at N930 per dollar. This practice allowed them to secure a profit margin of at least N10 per transaction.
The naira’s diminishing value is evident when examining the statistics. Since the beginning of August, the naira’s value has weakened significantly, experiencing an 18.7% decline within the parallel market. July 2023 also witnessed a notable depreciation of 11.5% in exchange rates. The month of August alone displayed an alarming 11% depreciation, marking the most substantial drop since Nigeria adopted a flexible naira valuation system.
Delving into the causes of the ongoing depreciation, the Central Bank of Nigeria (CBN) provided insights into the matter. On August 10, 2023, the Acting CBN Governor, Folashodun Shonubi, attributed the continuing naira crash to two main factors: the influx of illegal diaspora remittances and the activities within the unregulated black market. Speaking at the National Institute for Security Studies in Abuja, Shonubi shed light on the complexities of the situation.
Shonubi highlighted the challenges posed by unregulated markets, stating, “The unregulated black market becomes a breeding ground for illicit activities due to its lack of oversight. Surprisingly, a portion of the funds circulating within these covert markets originate from diaspora remittances. This underscores the urgency of comprehending the intricacies at play. Relying solely on hearsay is inadequate. Without a comprehensive understanding, our decisions may lead us astray,” emphasizing the importance of grasping the nuances fueling the crisis.
The naira’s sharp decline to N930 against the dollar on August 10, 2023, highlights the multifaceted challenges confronting Nigeria’s economy. A combination of heightened dollar demand, scarcity, unregulated market dynamics, and the infiltration of unrecorded diaspora remittances has contributed to this economic turbulence. Addressing this crisis necessitates a comprehensive approach involving regulatory measures, enhanced transparency, and a thorough understanding of the underlying dynamics to stabilize the naira’s value and restore economic equilibrium.