Connect with us

Business

Exchange rate disparity between official and parallel market fall to all time low

Published

on

Naira and Dollar 2

The exchange rate between the Naira and the Dollar seems to have reached parity following the central bank’s crackdown on Binance, a platform for trading cryptocurrencies.

Research by ThePressNG indicates that the exchange rate has averaged N1600/$1 in both the official and parallel markets. Although the rates are not identical, they have fluctuated between N1590 and N1630 in both markets, respectively.

This results in an exchange rate disparity of less than 2%, significantly below the 5% often considered as an acceptable premium between the official and parallel market rates.

This narrow margin has been consistent for about 9 trading days, with a disparity as low as 0.2%. The previous closest period was 8 days, from June 19 to June 30, 2023, with a disparity of 0.3%.

Since Binance discontinued the pairing between the Naira and the stablecoin USDT, foreign currency traders seem to be aligning their quotes with the official market rates.

Findings by ThePressNG also indicate that retail forex traders, such as banks and International Money Transfer Operators (IMTOs), reflect market-determined rates, which are closer to, and in some cases, weaker than the black market rates.

Analysts at ThePressNG believe that the first step towards achieving price discovery is to ensure exchange rate stability and eliminate volatility.

A recent Goldman Sachs report suggests the exchange rate is currently undervalued and could strengthen to around N1,200/$1 within a year.

 

Trending