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Increase in oil imports, others to widen gap between FX, parallel market in Nigeria — PwC

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It has been revealed that the increase in oil importation, consumption of foreign transportation, education, medical tourism and financial assets will continue to widen the gap between the official foreign exchange market and the parallel market in Nigeria.

This was disclosed in the latest report from PwC Nigeria for October.

Part of the report said: “The Central Bank of Nigeria maintained control over the official foreign exchange market by offering a more favourable exchange rate and using the threat of sanctions. This allowed them to finance over 60 per cent of USD import demand from 2005 to 2013, giving them significant influence over FX rates for goods and services.

“However, Nigeria’s external accounts were changing due to an artificially strong exchange rate; non-tradable services in the import basket grew, driven by increased consumption of foreign transportation, education, health, and financial assets. The other big shift in dollar demand composition was in oil imports which rose from 10-15 per cent in 2005 to 20-22 per cent of total imports at the end of 2022.”

The case added that the rise in Nigeria’s import basket and the decline in crude oil exports relative to autonomous flows widened the gap between the parallel market and the official rate.

Naira has been taking a beating in the currency market following the unification of the segments of the forex market mid-June by the Central Bank of Nigeria.

In a bid to strengthen the naira, the apex bank has introduced some measures including the reintroduction of Bureaux De Change, and the lifting of the restriction on sourcing dollars from the official currency market for some items including cement, milk, rice and 40 other items and others.

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