The naira plunged to a record low against the dollar on the official market on Friday, nearing the rate it trades at on the unofficial parallel market.

The data from LSEG showed that the currency of Africa’s largest economy fell as low as N1,160 to the dollar, before recovering to around N800, according to a Reuters report.

Analysts attribute this decline to the Central Bank of Nigeria’s (CBN) delay in clearing outstanding foreign-currency amounts owed in forward deals. This has created a situation where the official exchange rate is no longer reflective of market forces, leading to a widening gap with the parallel market rate.

Last week, CBN Governor, Olayemi Cardoso, announced his intention to allow market forces to determine exchange rates. However, this plan has yet to be implemented, leaving the naira vulnerable to external pressures.

As of Friday, the naira sold for approximately N1,165 on the parallel market, highlighting the significant disparity between the official and unofficial exchange rates.

The naira’s decline has raised concerns about inflation and economic stability in Nigeria. Businesses are struggling to access foreign currency, while the cost of imported goods has increased dramatically.

It remains to be seen how the CBN will address this issue and stabilise the naira. The implementation of Governor Cardoso’s plan to allow market forces to determine exchange rates could be a step in the right direction, but it is vital to ensure that clear and transparent rules govern market operations.