The dollar hit N730 to a US Dollar with an average of N726.67 in the parallel market at the close of business on Wednesday, the same day the 2023 political campaign officially commenced in the country.
But the Importers and Exporters Window (better known as “official rate) still hovered around N431.35/US$.
NgnRates.com, a financial technology project providing most recent Naira rates, reports that US Dollar to Naira parallel market rate in the last seven days took values between ₦695 and ₦725 with an average of ₦715.74.
Compared Wednesday’s values with the last seven days, NgnRates.com says the average Dollar to Naira rate had a 10.93 points increase from ₦715.74 to ₦726.67 which corresponds to a 1.53 percent rise.
Analysts said the Naira had weakened in the parallel market due to increased speculations, falling external reserves, and low foreign exchange inflows.
The Vice President of the Lagos Chamber of Commerce and Industry, Mr Gabriel Idahosa said one of the major factors responsible for the rate hikes is the new Monetary Policy Rate (MPR) of the Central Bank of Nigeria (CBN), which went up from 13 per cent to 15.5 percent.
“Lending rates by banks and other financial institutions will rise following the MPR hike. This will lead to further rise in cost of operations by all businesses, aggravating the rising inflation. This has triggered further demand for dollars to avoid more decline in the value of any funds held in Naira”, he told The PUNCH.
According to Idahosa, the commencement of elections also meant that a lot of funds had started pouring into campaign-related activities.
“Beneficiaries of these spending will be converting Naira funds received to Dollars as fast as possible”.
An economist at the University of Uyo, Prof Akpan Ekpo said the demand for Dollar was higher than the supply, especially with the many restrictions by the CBN.
“There are two things: One is, demand for dollars is more than supply. So people are going to the black market. And the process for getting dollars from CBN is cumbersome.
“Then there’s not much inflow. We don’t export enough non-oil goods and services, and we depend more on oil and the price has declined in the last few weeks”, he said.
He also agreed that the preparations for the 2023 elections has also caused ripple effects.
“Of course, campaign will soon start, and politicians are hoarding dollars for the campaign. They are buying Dollars for the campaign”.
Nigeria’s foreign reserves stood at $38.5 billion on Wednesday, as against $40.5 billion in January.
