The expanding gap between the official and parallel market exchange rates of the Nigerian Naira currency goes to show the federal government’s lack of ability to stabilize the currency and the possibility that it may devalue further, according to Fitch Ratings Inc.
The Naira was quoted at 1002 per dollar at the parallel market on Wednesday, October 5, according to Umar Salisu, a foreign-exchange operator who collates the data in Lagos, the country’s commercial hub.
However, it was 26% stronger at 745.19 Naira/dollar in the official window, according to FMDQ, a Lagos-based platform where the currency is exchanged.
The Naira has grown extremely weak in street trading in the last two weeks as the central bank refrain from growing the supply of the greenback at the official window, where the currency rate has been extremely volatile.
Naira non-deliverable contracts for three months time had exchanged at a record 821.38 per dollar on Wednesday.
Governor Olayemi Cardoso, who lawmakers confirmed to the position of the Nigerian Central Bank last week, is yet to announce his policy preference.
Fitch Ratings had in an emailed statement said that the gap between the official and parallel market rates showed the difficulties in sustaining exchange-rate liberalisation and increased the possibility of a further devaluation.
The West African nation had allowed its currency to diminish 40% against the dollar in June as part of the proposed reforms aimed at attracting foreign investment to aid in reviving the struggling economy.
The devaluation and currency reforms had for a short period, merged the official and parallel market rates before the spread began widening again in August as a result of inadequate official dollar supply, according to Fitch Ratings.
Prior to Nigeria initiating its currency reforms, the gap between the official and parallel market rate was as high as 70%.
