On May 29, 2023, President Bola Ahmed Tinubu was sworn in as the new Nigerian president, and he announced that he would commit to fixing the multiple exchange rate system in Nigeria.
President Tinubu expressed displeasure with the multiple exchange rate system and promised to tackle it and remove fuel subsidies.
We are gathered here today to witness how the price of the naira against the dollar has fared since he resumed office on May 29, 2023.
What is the Parallel Market?
A parallel market emerges when there is control pricing and a higher demand than the level of supply of a particular commodity, if this is proscribed by law, it is then referred to as a “Black Market” – Guardian
Why is the parallel market important?
The Forex black market is where the ‘ordinary’ Nigerian can purchase dollars for international transactions, especially for the everyday Nigerian looking to purchase subscription services like Netflix, Apple Music, Amazon Prime, AliExpress etc.
The CBN provides an official rate that is almost impossible for the average Nigerian to access. This CBN rate was usually reserved for exporters, international students and some select categories of people.
Places Where You Can Find Parallel FX Prices
Check Chipper Cash App, Grey, and P2P Crypto Market or ask the BDC guy at the banks, airports, or busy commercial areas.
Getting The Data For Analysis
Data was collected from Naira Rates a Twitter account that publishes the daily market rates of the parallel forex market. The FX data was collected from the 29th of May, 2023, to the 20th of October, 2023.
Results
The line graph shows a steady increase over 5 months. However, there appeared to be a major dip around August 15-17. This occurred as a result of the NNPLC securing a 3 Billion dollar loan. Nigerian Patriots (the real ones) were overjoyed and took to social media to express happiness that the dollar was taking a beating from the Naira, but their joy was shortlived as the dollar simply requested them to hold its beer and proceeded to surpass ₦1000 on September 28th.
To view the interactive Dashboard, Click Here (Best viewed on your computer)
What Does The Dollar Value Increase Mean?
We are an import-reliant nation, which means we don’t produce enough for ourselves; hence, we need the dollar to purchase what we need. The higher the dollar exchange value goes up, the more expensive it becomes to purchase significant items. This is Inflation.
Another issue is Purchasing power. A weaker Naira means that Nigerians can buy less with the same amount of money, reducing their purchasing power. This can impact the standard of living for many people.
The image below is self-explanatory.
Conclusions:
- To get 1 US Dollar, as of the last analyzed date – Oct 20 2023, You’ll have to spend ₦396 extra compared to May 29
- The NGN has lost approximately 52% of its value against the USD from May 29 to October 20, 2023.
- The lowest Nigerians have ever exchanged Naira for USD was on June 1, when the naira was ₦781 per USD
What Should We Do?
That’s a very good question. We don’t know, and we cannot recommend any financial advice.
If you find a solution, kindly send a DM on Twitter to @Paulodaguvnor
P.S: To view the interactive Dashboard, Click Here