The exchange rate between the Naira and the US dollar recorded a sharp fall on Friday morning, 21st October 2022, trading at a minimum of N755/$1 at the parallel market compared to N742/$1 recorded on Thursday.
The depreciation of the local currency at the black market has been attributed to increased demand and sustained FX scarcity in the market. The rate at N755/$1 is the highest on record. It also indicates a market differential of N313.87/$1 between the official market and the parallel market.
Meanwhile, the Central Bank of Nigeria increased the monetary policy interest rate to 15.5% last month from 14% in a bid to manage the rising inflation in the country, which reached a seventeen-month high in August 2022, largely due to the global energy crisis and depreciating exchange rate. Despite this action by the CBN, inflation has remained stubbornly high, a situation attributed to the depreciation of the Naira. On the other hand, the exchange rate at the official market remained stable at N441.13/$ as a result of the constant intervention by the CBN to curb exchange rate volatility.
As a result of the current state of the local currency, Nigeria’s external reserve has suffered a loss of about $2 billion year-to-date, falling to its lowest since 4th October 2022. It should be noted that, the foreign reserve stood at $37.71 billion as of 19th October 2022 from $40.52 billion recorded as of the beginning of the year.