Naira slides to N589 to $1 at parallel market as FX liquidity crisis persists


By Agency report

The free fall of Nigerian naira continued on Wednesday, dropping to N589 against the dollar at the parallel market.

The figure represents N1 or 0.2 per cent depreciation compared to the N588 it traded last two weeks.

Currency traders known as Bureaux De Change operators (BDCs) said that the forex liquidity crisis still persists in the market despite low demands.

The traders said demand for the greenback was low on Wednesday.

“People have not really resumed. It may be because of the holiday. Most of the shops are locked. People are not buying, the demand is low, but the dollar is now scarce,” one of the traders identified as Alhaji Musa said.

A parallel market (street market) is characterised by noncompliant behaviour with an institutional set of rules.

The Central Bank of Nigeria (CBN) has often maintained that the parallel market is not the true reflection of the naira.

On Wednesday, the US Federal Reserve is expected to raise interest rates by a half-percentage point to battle the country’s worst inflation in 40 years.

In March, the Fed hiked its benchmark borrowing rate for the first time since late 2018, upping it by a quarter-percentage-point.

The rate hike may significantly affect Nigeria and other emerging markets of the world. It may increase the cost of foreign borrowing, force foreign investors to pull out their funds, causing further depreciation of the naira.