In the past week, the naira has edged closer to a 15% gain versus the dollar in the black market, last night’s trading in Lagos and Abuja was at N820/$.
The market was seized by dread of a further decline in the value of the dollar, according to reliable sources who spoke to The Guardian. As a result, traders at important trading clusters rapidly dumped dollars yesterday.
The naira may strengthen to about N700/$ this weekend, according to a dealer who disclosed that he was desperate and searching for a chance to unload his hoardings. It maintained the upward trend that had been going since the start of the week.
Another dealer, who admitted that he was still holding onto a sizable portion of what he purchased at an auction, said “as we speak, there is no fixed rate. People sell at the slightest opportunity as they are not sure what the rate would be tomorrow. And the speed at which the hard currencies are falling against naira is too high. This is the cause of panic, and it is real.”
The Guardian is aware that the level of illiquidity is maintained by the extremely low trading volume, even in the midst of panic selling.
As a result, a lot of observers have written off the upward trend in the value of the local currency as being motivated by sentiment rather than solid market fundamentals.
The troubled currency appeared to be getting a breather as it recorded a modest gain, trading at about N880 naira to 1$ dollar at the black market mid-week, according to a report in The Guardian published about 48 hours after President Bola Tinubu and Acting Governor of the Central Bank of Nigeria (CBN), Folashodun Shonubi, held a critical meeting on the state of the foreign exchange (FX) market.
A new fear over shortages caused the dollar to soar last week, reaching an all-time high of N950/$ in the peer-to-peer (P2P) and parallel markets.
The official and unauthorized markets may eventually reach parity, convergent around the same value, in the next days if the current pace is maintained. With the current exchange rates, the arbitrage is now less than N100/$.
The premium on the black market reached N200 per dollar last week for the first time since the market liberalization in June, which was intended to harmonize the various exchange rates.
The premium reached 100% at the height of the crisis last year, which is the highest level ever seen since the nation returned to democracy in 1999. The margin increased to almost 100% during the military regime, sparking broad, widespread manipulation and the acquisition of banking licenses for foreign exchange transactions.
On Thursday, there was mourning in the well-known Zone 4 of Abuja as sellers complained about losses that, in some cases, exceeded N100 per dollar.
A Bureau de Change operator named Adamu Alhassan said: “I am not happy about what has been happening since morning because most of us have lost some money. The rate was N950 just last week. But now, we are buying at N820 and selling at N850. What comes next is unclear to us.
He responded when told that the bureau de change operators took advantage of the boom while it was still going on: “Of course, what do you expect?”
Samuel Itodo, who came to buy dollars, was overjoyed by the advance the naira had made in a short period of time and hoped it would continue.
“I am very happy with what is happening with the dollar. Who will believe that the rate can crash to the level within days? I was apprehensive about the effect the falling exchange rate will have on the costs of living.”
“As an import-dependent country, any rise in the dollar will automatically mean higher prices and higher cost of living. But can this be sustained on a longer term?” he remarked.
