Naira continues to fall as the shortage in foreign currencies in Nigeria worsens despite the efforts of the Central Bank of Nigeria.
Why it matters
Eight months after the Central Bank of Nigeria stopped the sale of forex to Bureau de Change operators, the forex scarcity in Nigeria continues to worsen at a worrisome rate. In the black market on Tuesday, the exchange rate stood at N585/$1 and N785/£1.
- The forex scarcity situation in the country is growing despite the rise in oil prices in the global market, which is selling at over $100 per barrel.
- Banks have also placed a $20 cap on online transactions in a bid to save naira from further doom.
Why this is happening
CBN stopped the sale of dollars to Bureau de Change operators to prevent the ease of forex leaving the economy. This created a supply gap with businesses, foreign investors, exporters, manufacturers, scrambling for dollars to fund their operations.
Reports say Nigerian banks struggle to meet 30% of their customers’ forex demand as Nigeria has limited inbound forex sources.
What this means
With limited access to forex, Nigerian businesses that require foreign expertise and equipment battle sustainability and profitability as they continue to scramble for foreign currencies to find their businesses. The scarcity of forex also means high exchange rates in black markets, which results in inflated prices of commodities handled by those businesses.