Dealers Dump Dollar As Naira Gains About 15%

Dealers Dump Dollar As Naira Gains About 15%

The Nigerian naira made significant progress against the US dollar in the unofficial market, experiencing a gradual increase of about 15% in value within just one week.

In places like Lagos and Abuja, the naira was observed trading around N820 to the dollar as of yesterday evening.

According to reliable sources, traders at major market centers were swiftly disposing of their dollar holdings due to concerns about the greenback’s value plummeting further.

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A trader, who confidentially admitted to being anxious and eager to sell off his accumulated dollars, expressed the possibility of the naira appreciating to approximately N700/$ over the weekend. This trend of improvement had been sustained since the start of the week.

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Another dealer, who disclosed that he still held a significant portion of dollars bought at an average rate of N920/$ the previous week, highlighted the uncertainty prevailing in the market. People were selling their dollars at any opportunity, fearing fluctuations in rates the next day. The rapid decline of foreign currencies in comparison to the naira was causing considerable panic.

Despite the panic-driven selling, it’s been observed that the trading volume remains notably low, indicating a lack of liquidity. Consequently, many observers are attributing the rise in the local currency’s value to emotional factors rather than solid market fundamentals.

Recent reports from The Guardian noted that shortly after a significant meeting between President Bola Tinubu and the Acting Governor of the Central Bank of Nigeria (CBN), Folashodun Shonubi, a moderate gain was registered in the troubled currency. It was trading at around N880/$ in the black market mid-week, just 48 hours after the meeting. This came after the dollar had reached an all-time high of N950/$ in the peer-to-peer (P2P) and parallel markets the previous week, sparking concerns over scarcity.

If the current positive trend continues, both the official and unofficial markets might eventually converge at similar values in the coming days. As per current rates, the gap between the two markets has decreased to less than N100/$.

During the preceding week, the premium on the black market had soared to N200 per dollar for the first time since the market’s liberalization in June. This liberalization aimed to harmonize the multiple exchange rates. Notably, during the height of last year’s crisis, the premium had even reached 100%, the highest ever recorded since Nigeria’s return to democracy in 1999. In the past, during the era of military rule, the margin had surpassed 100%, leading to widespread manipulation and even the procurement of banking licenses for foreign exchange transactions.

In the Zone 4 area of Abuja, dealers expressed dissatisfaction over substantial losses exceeding N100 per dollar in some instances. A bureau de change operator, Adamu Alhassan, expressed discontent over the recent market fluctuations, highlighting the contrast from the previous week’s rate of N950/$. However, he acknowledged the previous profitability of bureau de change operations.

A customer named Samuel Itodo, who was purchasing dollars, celebrated the remarkable gain achieved by the naira in just a few days and expressed hope that this trend would continue. He was concerned about the impact of a weakening exchange rate on living costs in an import-dependent country, emphasizing the potential consequences for living expenses. Nonetheless, he questioned the sustainability of this positive development over the long term.