Importers Return to Parallel Forex Market Amid Official Market Liquidity Challenges

Despite the recent decision by the Central Bank of Nigeria (CBN) to lift the ban on 43 previously restricted items for importers, liquidity challenges persist in the official foreign exchange market. As a result, importers have begun seeking foreign currency in the parallel market to meet their forex needs.

The Nigerian Naira had experienced some fluctuations, with the parallel market recording notable changes. According to data obtained from Aboki Forex, the Naira was being bought and sold at 1,140 Naira to the US dollar and 1,150 Naira to the US dollar. This was a significant shift from the earlier rate of 1,310 Naira to the US dollar observed just a few days prior.

The decision by the CBN to remove the ban on importers for the 43 previously restricted items was expected to improve the availability of foreign exchange in the official market. However, it appears that FX supply in the official market remains limited, leading importers to return to the parallel market to fulfill their foreign exchange obligations.

Analysts at Cordros Securities commented on the situation, stating, “Given the CBN’s unbanning of importers of all the 43 items previously restricted from the NAFEM in 2015, the market realized that FX supply is still minimal at the official market faster than we anticipated. Accordingly, importers have returned to the parallel market to fulfill their FX obligations.”

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The fluctuations and challenges in Nigeria’s forex markets highlight the ongoing complexities of managing currency exchange and the impact it has on importers and the broader economy. It remains to be seen how the situation will evolve and whether measures will be taken to address the persisting liquidity issues in the official market.