This has been a good week for the naira in the black market and bad week for speculators. Those who bought the naira at the high of N520 have seen their fingers burnt and are now wondering what to do with their stock of expensive dollars.
The naira has appreciated from the low of N520 to the US$ on 20 February to a high of N450 where it seems to have met some resistance.
The trick to the appreciation of the dollar in the black market has been Central Bank’s decision to flood the official market with dollars to meet personal and business travel needs of Nigerians. The CBN has also made it easier for Nigerians to access dollars for school fees and medical bills, and this has significantly reduced the need for Nigerians to approach the black market to buy the more expensive dollars. Sources say that the CBN moves have reduced the “panic” component in the demand for the dollar on the streets.
The big change for most Nigerians in the last week is the fact that it is significantly easier now to buy dollars from the banks once basic requirements are met and proper documentation provided. There are banks even promising to provide dollars for travellers within 24 hours once all documentation is provided.
However, there is an underlying fear that the current dollar rain by the CBN in the official market may not be sustained in the long run. But sources close to the apex bank say there is a long-term strategy at play. The ultimate target of the CBN is to get speculators off the market in a bid to find the true value of the naira untainted by speculative activities. The apex bank is also said to believe that some banks are also rigging the value of the naira.
So the strategy is to ensure that speculators get their hands burnt as many times as possible in a way that the naira find its true level. The CBN is confident that it has the reserves to punish speculators. In their estimation the true value of the naira should not be more than N350 to the US$ and they strongly believe that if speculators are taken off the market, the naira will approach this level. Closer to the N350 to the US$ mark, sources say that the apex bank may allow the naira float.
