The dollar hit N735 in the parallel market on Wednesday as political campaign activities began in the country.
According to Bureau De Change operators in Lagos and Abuja, dollar price had increased from N718 – N720 to N728-N735 in the last one week.
A BDC operator at Amuwo-Odofin in Lagos, Bala Usman, said, “It is N728. I can’t go less than that.”
Another operator, Abubakar Jamiu, at Zone 4, Abuja, told the PUNCH, “Dollar don cost, we are selling at N730, no more no less.”
But the dollar rate hit N735 by the close of Wednesday.
An operator in Lagos Island, Mallam Zakari, said that dollar rate had surged to N735 as at 4:54pm.
“Dollar is N735 and I will buy it for N731. Yesterday, we sold N728.”
However, at the Importers and Exporters Window, rate still hovered around N430/$.
The dollar-naira exchange rate was N431.19 as of Tuesday.
Analysyts said the naira had weakened in the parallel market due to increased speculations, falling external reserves, and low foreign exchange inflows.
Speaking on major factors responsible for the rate hikes in dollar to naira, the Vice President Lagos Chamber of Commerce and Industry, Gabriel Idahosa, said that the immediate cause of dollar rate increment was the new Monetary Policy Rate of the Central Bank of Nigeria.
“The immediate cause of the dollar price hike is the increase in the Monetary Policy Rate from 13 per cent to 15.5 per cent announced by the Central Bank.
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.”
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.”
Ekpo added that the preparations for the 2023 campaign also caused a ripple effect.
“Of course, campaign will soon start, and politicians are hoarding dollars for the campaign. They are buying dollars for the campaign.”
Nigeria’s forex reserves stood at $38.5bn on Wednesday, which was a drop by $1.8bn from $40.5bn recorded in January 2022.
The PUNCH earlier reported that the President, Association of Bureaux de Change Operators of Nigeria, Alhaji Aminu Gwadabe, had explained that the situation was caused by several factors, including elections, loss of confidence, and demand/ supply.
“It is a market where demand and supply determine the price. Do not forget that election years are associated with foreign exchange volatility, coupled with supply squeeze. External reserves, inflation, cost of inputs, and the Russia-Ukraine war are also key issues,” he said, arguing that there was indeed a loss of confidence.