Nigerians accumulating cryptocurrencies to shield assets against a weakening naira have contributed to a slump in the fiat currency to a record low in the unauthorized market.
The naira weakened to 670 per dollar on Wednesday said Abubakar Mohammed, an operator of a bureau de change that tracks the data in Lagos, the nation’s commercial hub. This compares with 424.34 naira at the official spot market as of 9.22 a.m. local time, 58% cheaper than the rate in the black market, where the greenback is freely traded.
Africa’s largest economy operates a multiple exchange rate system dominated by an official rate, which is tightly managed by the Central Bank of Nigeria. There’s also an unauthorized black market, where the rates are largely determined by supply and demand, making it a fairer reflection naira’s value. A third, the crypto exchange rate, has emerged as Nigerians increasingly accumulate the digital asset due to scarcity of the local currency from official sources compounded by three devaluations since 2020.
More people are buying cryptocurrencies because they are losing confidence in the naira, Aminu Gwadabe, president of the Association of Bureau de Change Operators of Nigeria, said by phone. “The USD rate on the crypto floor is used in determining the value of the local currency,” Gwadabe said.
While financial institutions are banned by the central bank from facilitating cryptocurrency trades in Africa’s largest economy, many Nigerians still exchange the digital currency in in the peer-to-peer market where transactions are priced in dollars.
The greenback was quoted at 687.6 naira on Wednesday for peer-to-peer transactions, according to live data on the website of Binance Holdings Ltd., the world’s biggest crypto exchange, an indication the naira could weaken further in the unauthorized market.
People are buying dollars to purchase digital assets, Gwadabe said. “The USD buy rate on the crypto floor is moving at the same time with local rate,” he said.
The Binance platform shows Nigerians had conducted $103,691 of trades in digital currencies in the 24 hours to 10.36 a.m. local time in Lagos on Wednesday. Nigerians traded $185 million of Bitcoin on the platform in the first three months of the year, accounting for a quarter of transactions in the period on Paxful, a crypto trading platform.
A spokesman for the central bank didn’t respond to WhatsApp and text messages for comment while telephone call didn’t connect. (Credits: Bloomberg)
Dollar To Naira Black Market Rate Today: Naira Crashes To Record Low N710/$1
Naira Crashes To New Low At N710/$1
Naira has weakened by 34 per cent in 10 months, closing at N710 to a dollar on Wednesday in the parallel market, with a margin of N280 from the official rate.
This is a pounding headache for manufacturers who are no longer able to get dollars from the official market to import their raw and packaging materials.
At the Investor & Exporter forex window, the naira hit a high of N444 before closing to the dollar at N430. The I&E market recorded a total turnover of $126.69m on Wednesday.
The President, Association of Bureaux de Change Operators of Nigeria, Alhaji Aminu Gwadabe, told The Punch on Wednesday evening that, “the rate closed at N710/$.”
Some Bureau de Change operators who spoke to one of our correspondents from Ikeja, Lagos, said a dollar was bought and sold for N700 and N710 respectively.
At Zone 4 in the Federal Capital Territory, Abuja, a dollar hovered between N705 and N710 between 11am and 4pm yesterday.
“Dollar is really very scarce today. You cannot find it anywhere,” said Abu Sani, one of the BDCs operating at the Abuja International Airport.
According to the head of BDCs, Gwadabe, the situation resulted from a drop in dollar supply and an unmet dollar demand, saying these had created a huge backlog, making it easier for unlicensed forex dealers to engage in speculative activities.
Gwadabe said over $20bn dollars was expected to come into the economy from the diaspora this year, with a large part of such funds coming in through unofficial channels because of the control by International Money Transfer Operators and other favored operators.
He noted that the BDC operators had established channels and should be allowed to access funds from the diaspora to add to Nigeria’s dollar liquidity and strengthen the local currency.
Nigeria has failed to leverage oil windfall to drive huge dollar inflows into the economy due to an opaque petrol subsidy regime, oil theft and lack of gas infrastructure. Its non-oil exports last year was merely $10bn, four times less than Vietnam’s $38bn earnings from garments in 2021 and nearly five times less than what the country received for exporting phones ($57.54 bn).
According to Professor of Economics at Nnamdi Azikiwe University, Awka, Anambra State, the situation was created by a demand pressure and politics, stressing that it could also have been fuelled by the rising insecurity.
“Nigeria is not producing anything. Infrastructure for production is not there. Lives are being lost and Nigerians are losing confidence in government. Under the situation, it is possible that people are looking for dollars to move abroad and escape the situation in Nigeria,” he said.
According to those who have sought travel allowances from deposit money banks, it takes months to get as little as $500 from banks. The situation has pushed many of them to the parallel market.
According to Nwogwugwu, Nigeria must now begin to get it right and revitalise the manufacturing sector to produce and earn dollars.
On his part, Gwadabe said apart from remittances, Nigeria needed to build an economy that was a net exporter of valuable goods and services to earn more dollars.
He said, “Now is the time for Nigeria to deepen its manufacturing base with products that will earn forex for the country. Nigeria needs to become a manufacturing hub and export more than it imports. That way, the naira will regain its voice and appreciate against the dollar and other global currencies.”
Gwadabe noted that though the naira was quoted at N710 to dollar at the parallel market, giving more roles to over 5,500 BDC operators would help to reduce pressure in the forex.
Meanwhile the Senate, on Wednesday, resolved to summon the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, to educate and inform senators in a closed session on the reasons for the rapid depreciation of the value of the naira.
It also mandated the Senate Committee on Banking, Insurance and Other Financial Institutions to assess the impact of CBN intervention funds meant to support critical sectors of the economy.
Dollar To Naira Black Market Rate Today plunged to N710/$1 compared to N685/$1 recorded in the previous trading session. This is according to information obtained from Bureau De Change operators.