The exchange rate between the naira and the US dollar has fallen to a record low at N685.5/$1 at the peer-to-peer (P2P) forex market, findings by NewsTimes from cryptocurrency P2P exchange market shows.
Dollars, which was traded at N667/$1 yesterday, has now fallen further by 2.8% to N685.5/$1, as demand for foreign exchange remains elevated amidst sustained scarcity.
The P2P market often traded in small volumes and the unit of exchange is the cryptocurrency USDT, which is a stable coin that trades 1:1 with the dollar.
Similarly, Bureau De Change operators sold forex at N665/$1 on Tuesday, indicating continuous nosediving of the local currency.
Exchange rate for “inflows” a term for dollar transfers from a foreign country into Nigeria or in another account in exchange for naira locally range from between N665-680 from some of the checks we conducted.
While the exchange rate is experiencing huge volatility and disparity at the unofficial markets, the Investors and Exporters window, where forex is traded official has also seen some level of downtrend in recent weeks, albeit controlled.
Notably, naira fell to N431/$1 at the I&E window on Tuesday’s trading session, the lowest rate recorded since the beginning of the year. This is following the recent decline in the volume of FX available in the market. On Tuesday, only about $58.03 million in FX value exchanged hands, representing a 35% decline compared to $89.8 million that was traded the previous day.
Some BDC operators have blamed the volatility in the parallel market on the fragmented and disorganized state of the market. Some have also blamed it only significant rise in demand as a result of panic buying.
Meanwhile, some P2P exchange market traded at lower rates this morning. For example, on Trove, the exchange rate was stated at N665 to a dollar, while Bamboo was N655/$1. It is also worth noting that N685.5/$ is the lowest rate stated on Binance.
External Reserve falls further
The nation’s external reserve has also resumed downward movement after recorded 27 days of consecutive appreciations. However, in the past one week, the external reserve has lost $138.7 million, after five consecutive days of decline.
The decline in the external reserve could be largely attributed to the intervention by the apex bank in the I&E window. Recall that Nigeria practices a managed floating exchange rate system, which allows the Central Bank to intervene regularly in the foreign exchange market to change the direction of the currency’s float.
In the previous week, a total of $840.5 million was traded in the market, a significant improvement compared to $211.98 million and over $400 million traded in the preceding two weeks. The improved liquidity came after the exchange rate fell to N430/$1, after which a sum of $383 million was injected into the market.
However, the rate has fallen a year-to-date record of N431/$1 after daily forex turnover slumped to $58 million.
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