With the Naira depreciating to N1,700 per dollar at the parallel market, Nigerians may face a surge in the price of Premium Motor Spirit (PMS), also known as petrol.
The naira depreciated to N1,700 per dollar at the parallel section of the foreign exchange (FX) market on Friday.
At the end of trading hours, the naira depreciated by 1.49 percent compared to the N1,675 per dollar traded on Thursday.
This currency drop not only drives up the cost of importing refined petroleum products but also creates inflationary pressures that could lead to a spike in petrol prices across the country.
As Nigeria imports a significant portion of its refined oil, the weakened Naira directly translates to higher import costs, making it more expensive to supply petrol to the local market.
On Friday, the Naira depreciated by 1.49 percent, falling from N1,675/$ on Thursday to N1,700/$—its lowest level in seven months. Currency traders in Lagos reported a buying rate of N1,680/$ and a selling rate of N1,700/$, leaving a N20 profit margin.
Despite a slight rebound in the official window, where the local currency appreciated by 2.24 percent to N1,540.78/$, the parallel market remains a major pointer of pricing pressures faced by Nigerian consumers.
As the local currency continues to lose value, the cost of PMS, which is heavily dependent on the FX market, will likely increase.
The weakened Naira leads to higher costs for importing refined oil, transporting it across the country, and storing it for distribution.
Additionally, fuel suppliers may face challenges in meeting demand as the rising costs squeeze their profit margins, potentially causing supply chain disruptions and further pushing up the prices at the pump.
The CBN said the FX reforms were tailored towards harmonising multiple exchange rates, promoting transparency, and lessening the chances of arbitrage opportunities.
On September 25, Olayemi Cardoso, governor of CBN, said the multiple interest rate hikes have restored confidence in the Naira.