Exchange rate: Disparity in official/parallel rates closing up since 2018

•Naira now N756/$1 at I&E, N780/$1 at parallel markets

•Rates convergence to happen soon – Analysts

By Chinwendu Obienyi

Nigeria’s legal tender, the naira, closed at N756.61 per dollar at the investors and exporters (I&E) window on Tuesday, continuing the week on a fragile front on the back of recent reforms taken by the Central Bank of Nigeria (CBN).

The CBN had lifted restrictions on FX withdrawals from domiciliary accounts and made operational changes to the FX market last week. This resulted in the FX market experiencing volatility on resumption of activities on Monday, as the Naira which opened at N663/$1 closed at N770/$1 while it appreciated against the US Dollar at the parallel market, trading at an average rate of N759/$1. This represented a decrease of 0.26 per cent compared to the previous day’s trading session, where the dollar traded at N757/$1.

The volatility however, continued as the Naira experienced further depreciation against the Dollar, reaching an average exchange rate of N780/$1 in the parallel market yesterday, signifying a 2.77 per cent compared to Monday’s trading session.

On the other hand, the Naira closed at N756.61 per dollar at the investors and exporters (I&E) window. This is also the first time the disparity between the official exchange rate and the parallel market rate are close to par since 2018.

The Central Bank of Nigeria (CBN) had announced the abolishment of its multiple FX windows, collapsing all the official FX segments into the Investors & Exporters Window (IEW).

Accordingly, the CBN re-introduced the “willing buyer, willing seller” model at the IEW, with the operations guided by the extant circular on the establishment of the window, dated 21 April 2017.

Reacting to the development, the Deputy Governor, CBN, Dr Kingsely Obiora, in an interview with Bloomberg in Morocco, was quoted as saying that the CBN will further ease controls in the next couple of weeks to help determine a new level for the naira.

On whether the apex bank expects the official and parallel-market exchange rates to converge soon, Obiora said: “I do not think it will take a long time.”