Naira Falls in Parallel Market After Emefiele’s Scolding

By Bashir Olanrewaju

Nigeria’s naira currency fell almost 1 percent on Wednesday in the parallel market, just a day after Central Bank of Nigeria Governor Godwin Emefiele dismissed it as a market for illegal activities that shouldn’t dictate the true value of the national currency.

Foreign exchange traders in bureau des changes and other street traders, sold a dollar for 487 naira, 0.8 percent weaker than the 483 naira rate of the previous day, according to rates offered in Lagos and Abuja.

“There are many people who need to conclude transactions as the year comes to an end and are willing to pay more to get foreign exchange,’’ said Mohammed Majia, an Abuja-based currency trader. “They don’t have time for all the bureaucracy involved in getting dollars from the banks.”

Since President Muhammadu Buhari came to office in 2015, the central bank under Emefiele has pursued a policy of stemming foreign exchange demand in the face of lower oil receipts through imposing restrictions on certain imports and running a multiple exchange-rate system. With official dollars less accessible, many Nigerians rely on the parallel market to source hard currencies to meet foreign exchange obligations, leading to an increasing divergence of the rates.

Critics of the central bank’s foreign-exchange stance have often pointed to the parallel market rates as more indicative of Nigeria’s economic realities. But Emefiele disagrees and had nothing but disparaging words for those suggesting any further devaluation of the naira toward the parallel market rates.

“The parallel market, as far as we know it and the data that we have, is a shallow market with no more than 5 percent of market share,” Emefiele said at the Nov. 24 MPC briefing. “The parallel market, quote me, is a tainted market in NIgeria, for people who desire to deal in illegal foreign exchange transactions.

Yet, the fact remains that there have been times in the past where both the parallel and official rates converged, with even banks offering higher rates. With record low oil demand due to the coronavirus pandemic, it appears Nigeria, which depends on the commodity for most of its government revenue and foreign exchange receipts, will continue to struggle in the coming months to meet its hard currency needs.