By Ojukwu Emmanuel Chiadikaobi
Official and Black Market Rates Reflecting Divergence Amidst Central Bank Policy Adjustments
As of today, February 28, 2024, the exchange rate dynamics between the Nigerian Naira (NGN) and the United States Dollar (USD) reveal a notable disparity between the official rate and the prevailing rate in the black market. According to data released by the FMDQ Security Exchange, the official forex trading portal, the Naira commenced trading at ₦1584.76 per dollar on Monday, February 26, 2024, and concluded at ₦1615.94 per dollar on Tuesday, February 27, 2024.
However, a stark contrast emerges in the informal market, where the Naira is currently trading at an elevated rate of ₦1,650 per Dollar. This variance occurs despite recent directives from the Central Bank of Nigeria (CBN) aimed at unifying the various segments of the foreign exchange market. The CBN, in a circular dated June 14, 2023, announced the collapse of all FX windows into the Investors and Exporters (I&E) window, reinstating the “Willing Buyer, Willing Seller” model.
The circular further outlined operational adjustments, including the abolition of segmentation, the reintroduction of order-based two-way quotes with a bid-ask spread of N1, and the implementation of a Central Counter Party (CCP) for transaction clearance. Additionally, trading limits on oversold FX positions were proscribed, with provisions for hedging short positions through OTC futures.
These regulatory modifications signal a shift towards a more liberalized FX market, facilitating greater flexibility in the valuation of the Naira. However, the persistence of a significant variance between official and black market rates underscores ongoing challenges in achieving exchange rate stability. Further guidance on operational changes is anticipated, with implications for authorized dealers and the broader public.
The evolving landscape of Nigeria’s FX market reflects efforts to adapt to dynamic economic conditions while seeking to balance the objectives of exchange rate stability and market efficiency.