Naira crashes to N730 at the black market amidst dollar scarcity

By: Damian Okonkwo

The Nigerian naira has shown more weakness against the US dollar since October. The climax of this weakness was experienced last Friday with the naira exchange rate to the US dollar at the black market depreciating to its lowest rates ever at N730/$1.

Observing the movement between the Naira exchange rate at the Investors and Exporters (I&E) window which is the official exchange rate for the naira today; it appears that the black market dealers have become autonomous aggressive rate-setters hiking the rate at will. While Naira appreciated last Friday at the official I&E window by 0.2% rising from N437.5/$1 recorded earlier on Wednesday 5th October to exchange at N436.63/$1 on Friday 7th October 2022. One would naturally expect the rate to appreciate at the black market also, but the reverse seemed to be the case. The rate was rather depreciating at the black market by the same ratio.

Amidst the current dollar weakness against the US dollar, the CBN is currently optimistic that the rate will gradually fall again with the implementation of the RT200 FX program which has been designed to increase the nation's earnings through a consistent inflow of FX from exports.

However, a critical study of the progress recorded so far since the introduction of this RT200 in February 2022, showed it has not yielded any positive results. For instance, the exchange rate between the Naira and US dollar in the black market when this policy was introduced was N575/$1. The rate has depreciated massively since then by over 17% to exchange at N730/$1 in October 2022.

The RT200 FX program which was introduced at the beginning of the year is a non-oil export yield repatriation policy scheme, designed to stimulate economic growth by repatriating the proceeds from oil to increase the inflows of FX into the country and reduce high dependency on the US dollar.

With the kickoff of political campaigns in Nigeria recently, investors are all the more fearful that the rate might rise further as politicians are set to carry out more importations to support their campaigns.