(Bloomberg) – The Nigerian naira has fallen to its lowest in more than three years in the parallel market amid increased demand for dollars amid a currency shortage.

The local unit depreciated to 495 per dollar on Friday, its lowest since February 23, 2017, widening the gap with the official rate from 379.5 to over 30%, according to abokifx.com, a website which gathers the rates of the parallel market in Lagos. The currency was trading on the interbank market at 389.74 at 4:54 p.m. in Lagos

There is a diversion of entries from official channels to the parallel market due to the rate spread, Murega Mungai, head of Aza Finance’s trading desk, said Thursday. The spread of the market has created arbitrage opportunities for recipients of remittances such as exporters and individuals.

The pent-up demand in the forex market is not unprecedented given the increase in purchases of items in preparation for the seasonal festivities, said Nkemdilim Nwadialor, analyst at Tellimer Markets. “It was made worse by the fact that throughout the year we had a shortage of dollars,” she said.

A directive from the central bank that exporters must register with it through an online portal has slowed the export of cocoa and other non-oil exports. This will likely exacerbate the currency shortage in Africa’s largest economy and hamper government efforts to diversify the economy away from its dependence on oil, the country’s main export.

Nigeria’s foreign exchange reserves, currently $ 35.4 billion, have fallen about 3% since May, when they fell to $ 36.6 billion, after recovering from April lows when they have been affected by falling crude prices and the coronavirus pandemic.

The exchange rate gap in parallel and official markets is due to falling revenues from oil, Nigeria’s main export, said Finance Minister Zainab Ahmed. The government is concerned about the spread and is taking action to address the shortage problem, but “the progress is not as big as we hoped,” she said in an interview with Bloomberg TV on Friday.

“We hope to reach a uniform level very soon so that the impact of the exchange rate becomes moderate,” Ahmed said.

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