Yesterday, as the market shifted to a panic mode, the value of the Naira plunged to as low as N910/$. There are new worries that the struggling currency is still far from bottoming out and that it could hit the N1000/$ mark in the coming weeks as a result of the local currency shattering the psychological limits of N900/$.
Three weeks after the unofficial market’s liberalization, the Naira maintained steadfastly at N750/$ dollar despite the unsettling wide market arbitrage canceling out.
However, as the euro started to tumble sharply in the last three weeks, the mood on the market altered. It first fell to N800/$ and then began to gradually lose value, dropping to N880/$ dollar last week.
Lagos’s buying and selling bids yesterday were between N900 and N915 per dollar. The majority of black market users have ran out of supplies under extremely volatile trading conditions, according to information provided to The Guardian.
Dollar traded at N900 earlier in the day on peer-to-peer (P2P) platforms like the well-known Binance Exchange, but it soared to N923 at the time of publication. It’s interesting to note that the value of the naira was steady at the official Investors and Exporters (I&E) market, where it had been fluctuating between N750 and N800 throughout the previous week. Trading for yesterday’s session began at $782.38 and ended at $782.59 yesterday.
The black market premium, which had decreased to almost nil days after the rates converged, had increased to N128 per dollar or 16% as of yesterday evening.
The spread is currently higher than the advised 5%, albeit being relatively low compared to previous year when it increased to 100%. According to the International Monetary Fund (IMF), arbitrage rates over 5% are reason for worry since they lead to roundtrip trades, which are common on the Nigerian market.
Some international organizations, like the Bank of America, have voiced optimism about the future of the local currency since the Central Bank of Nigeria (CBN) shut down the foreign exchange (FX) market.
For instance, in a letter dated June 28 to clients, the Bank of America (BOfA) indicated in an earlier report that the naira transitioned from being overvalued to undervalued due to the long-awaited foreign exchange reform.
“We now see a naira fair value of 680 per dollar (previously 580). However, naira is likely to trade above this level, with year-end N700, and a return to N650-N680 in early 2024,” BOfA analysts revealed.
Other experts forecasted a gradual currency appreciation after resolving the backlog of FX demands. However, a worldwide business intelligence research organization this week expressed caution about the nation’s commitment to a liberalized market, the Economist Intelligence Unit (EIU).
The authority, which it claimed lacked management experience with free float, will recover tighter control, according to the prediction.
The EIU predicted that the naira will end the year at N815 per dollar and fall to N1,018 per dollar in 2027.
