November 6, 2023

Nigeria’s naira firmed to 1,000 per dollar on the black market on Monday, online platform abokiFX showed, recovering from a record low of 1,300 naira, after the central bank started to clear outstanding currency forwards owed to banks.

The naira has hit successive record lows on the black market, where it trades freely, as excess demand on the official market gets funneled to the unofficial market.

The central bank last week said it had started clearing outstanding foreign currency forwards owed to banks, with banking sources saying an initial payment of $1 billion had been made. The naira has been under pressure from past due obligations.

The naira crossed the 1,000 naira mark on the black market on Sept. 26, the day newly-appointed central bank governor Olayemi Cardoso appeared before the Nigerian senate for his confirmation hearing.

The central bank has not intervened on the official market since October, helping accelerate the naira’s slide on the black market.

The currency hit a record low of 1,300 naira per dollar on the black market, a month after it crossed the 1,000 naira mark, amid thin trading volumes on the parallel market and dollar shortages on the official market.

Nigeria lifted restrictions on trading the currency on the official market in June, to the delight of investors, but the expected dollar inflow is yet to materialise, sending the naira tumbling.

Cardoso has said the naira will adjust once rules for market participants are made clear. Finance Minister Wale Edun has said Nigeria is expecting $10 billion in foreign currency inflows in weeks to improve foreign exchange market liquidity.

On the official market, the naira was trading at 884.53 to the dollar at 1200 GMT.

REUTERS