The Nigerian Naira fell to N604/$ at the parallel from N565 at the start of the year despite the Central Bank of Nigeria (CBN) interventions aimed at strengthening the local currency.
This is based on information acquired from Nigerian BDCs, who attribute the increase in dollar demand to the election season as politicians stocking up on dollars before Nigeria’s primary elections start over the weekend.
Through intervention supported by external reserves, the CBN fixes the exchange rate in the I&E window at around N418. The difference between the I&E and the black market has expanded by N188 as the Naira continues to decline.
The volatility in the Foreign exchange market, according to Anwar Usman, a BDC operator in Lagos, is due to a shortage of forex supply, while demand has risen sharply in recent weeks.
He said, “Dollar demand has increased significantly, especially since the election is fast approaching, which is why the exchange rate has gone up.”
Politicians competing for support from delegates in the party primaries are creating massive demand for dollars in cash, Usman said by phone. “Demand is not going to abate soon, which means more pressure for the naira, and also because dollar supply is very low,” he said.
Idayat Hassan, director of the Abuja-based Centre for Democracy and Development stated that Politicians in Nigeria have a history of buying votes at party primaries going as far back as the 1993 elections.
He said, “I think we’re just seeing the beginning of the rise of the dollar because as we move closer to the primaries and the parties are trying to put their houses in order, the value of the dollar will also trade up.”
