The Nigerian currency, the naira, has been losing value against the US dollar, and on Thursday, it reached a point where N920 were needed to buy just one US dollar in the informal exchange black market.
Naira’s value decline caused by increased dollar demand despite Central Bank’s guidelines
This drop in the naira’s value happened because more people were looking to buy dollars, increasing the demand for them.
Even though the Central Bank of Nigeria (CBN) had outlined a plan for how currency exchange businesses called Bureau De Change (BDC) should work, it didn’t stop the naira from falling.
In this informal market, otherwise called black market, currency traders were buying US dollars for N900 naira and selling them for 920 naira leaving a profit margin of N20. This is according to data gathered by VERY SERIAL from Bureau De Change operators.
In another market where investors and exporters trade, the naira’s value dropped even further, to 773.42 naira for a dollar.
Financial experts are concerned about this situation. They think that the naira’s temporary improvement after Nigeria got a loan of $3 billion from Afreximbank is fading away.
Some suggest that the policies around BDCs need a big change. These are businesses that buy and sell foreign currency.
Some experts think there are too many of these businesses, making it hard for the Central Bank to control their actions.
Some experts recommend that BDCs should become a part of banks, making them follow stricter rules. They also suggest that the Central Bank should make sure BDCs report their activities better and follow the rules, or else they might lose their licenses.
Despite these challenges, some analysts believe that the naira could improve if the Central Bank continues its efforts to manage the foreign exchange situation.