In the intraday trading on Wednesday, July 29, 2020, Nigeria’s exchange rate in the NAFEX window rose to N389.25. In contrast, the exchange rate of the parallel market remained unchanged for the second consecutive day after hitting a new low on Monday in July. The closing price on the 27th was N475/$1.
Parallel market: According to the well-known foreign exchange tracking website Abokifx, on the black market of informal transactions, the exchange rate of Naira against the US dollar remained unchanged for the second consecutive day, closing at N475/1 US dollar. This is the same exchange rate as on Tuesday, July 28. Some dealers contacted by Nairametrics research also confirmed that the price was the same as N475/1 USD.
However, the cost of the wired transfers is as high as N477/$1 (extra N2 premium). Wired transfers represent non-cash foreign exchange transactions between buyers and sellers without going through official channels. Wired transactions are conducted through a bank account, which usually costs more.
NAFEX: The naira appreciated against the U.S. dollar in the investor and exporter (I&E) window on Wednesday, closing at N389.25/1 U.S. dollar. Compared with the closing price of the N389.50 exchange rate reported on Tuesday, July 28, this represents a gain of 25 kobo. On Wednesday, the indicated exchange rate was 1 U.S. dollar to N388.61. Compared with the N388.44 to the US dollar recorded on Tuesday, this means a drop of 17 pounds. The naira fell to N392.50 in intraday trading, and then rose to the closing price of N389.25. The intraday trading price is also as low as the N380/1 US dollar. Foreign exchange is sold at several prices throughout the day.
Exchange rate disparity
On Tuesday, the exchange rate difference between NAFEX’s official exchange rate and the black market exchange rate was still very large and remained at N85.75. Nigeria maintains multiple exchange rates, including CBN official exchange rate, BDC exchange rate, SMIS, and NAFEX (I&E window). Exchange rate unification still exists and will be implemented several weeks after the central bank governor confirms that it will be implemented. The Minister of Finance also admitted that Nigeria is seeking to unify its foreign exchange window, a move that is deemed to meet the requirements of the World Bank. Nigeria is seeking a World Bank loan of up to US$3 billion. The country has been under pressure from the International Monetary Fund and the World Bank to demand currency reforms.