Dollar rate on Monday crashed to N1,450, pushing up the value of the naira by 2. 07 percent as speculators offload hoarded foreign currency at the parallel market, popularly called the black market.
The naira, which closed at N1,480 on Friday, appreciated to N1,450 on Monday, resulting in a loss of money by many speculators who bought dollars at higher rates.
“There are enough dollars in the market now and demand is low. I do not know where they are bringing dollars from but individuals are bringing dollars to us. Some of us who bought at a higher rate are now losing money as the dollar is going down,” one street trader told BusinessDay on Monday.
The Naira, Nigeria’s currency strengthened against the dollar all through the five trading days as the foreign exchange (FX) market closed on Friday.
The local currency gained 9.88 percent to close at 1,431.49 per dollar on Friday from the opening rate of 1,572.86 per dollar on Monday, at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
On a daily trading basis, the naira appreciated by 1.52 percent as the dollar was quoted at N1,431.49 on Friday, stronger than the 1,453.28 quoted on Thursday at NAFEM according to data from the FMDQ Securities Exchange.
The summary of the daily FX market trading showed that the intraday high closed at N1,468 per dollar on Friday, stronger than N1,598/$1 closed at on Thursday. The intraday low closed flat at N1,301 per dollar on Friday as against N1,300/$1 on Thursday.
The naira has been appreciating against the dollar recently following some foreign exchange reforms by the Central Bank of Nigeria (MPC).
Key reforms encompass the unification of exchange rate windows, liberalization of the FX market, clearance of FX backlog obligations for banks and airlines, implementation of a Price Verification System (PVS), imposition of limits on banks’ Net Open Position, removal of the daily cap of N2 billion on remunerable Standing Deposit Facility (SDF), and overhaul of the Bureau De Change (BDC) segment.
Additional measures focus on fostering a willing buyer-willing seller market, eliminating margin limits for International Money Transfer Operator (IMTO) remittances, introduction of a two-way quote system, and comprehensive reforms within the BDC segment to bolster stability, transparency, supply, and price discovery in the Nigeria Autonomous Foreign Exchange Market.
According to a report by Financial Derivatives Company Limited (FDC) the naira has been misaligned from its fair value for an extended period. In 2024 alone, it lost over 36 percent, plunging from N1,210/$ to N1,915/$ (in the parallel market). Ever since the MPC meeting last month, the naira has regained over 18 percent to its current level of N1610/$. Many pundits were of the view that the naira would fall to as low as N2,500/$ in 2024.
