Naira crashed to as low as N910/$, yesterday, at the parallel market as the market switched to a panic mood. With the local currency breaking the N900/$ psychological ceilings, there are fresh concerns that the troubled currency is still far from bottoming out and that it could hit N1000/$ mark in the coming weeks.
Naira held tightly around N750/$ three weeks into the market liberalisation at the unofficial market even as the worrisome wide market arbitrage cancelled out.
But the market sentiment changed in the past three weeks as the currency began a free fall. First, it plunged to N800/$ and started a gradual depreciation that took the value down to N880/$ last week.
Yesterday, the buying and selling offers ranged between N900/$ and N915/$ in Lagos. The Guardian was also informed that most black market dwellers have run out of supply amidst extremely volatile trading conditions.
On peer-to-peer (P2P) platforms such as the popular Binance Exchange, dollar traded at N900 earlier in the day but spiked to N923 at press time. Interestingly, the value of naira remained stable at the official Investors’ and Exporters’ (I&E) window where it has traded between N750 and N800 in the past week. Yesterday’s trading session opened at ₦782.38/$ and closed at N782.59/$.
The premium on the black market, which fell to near zero days after the rates convergence, widened to N128 per dollar or 16 per cent as at yesterday’s evening.
Whereas the spread is relatively low compared to last year when it rose to 100 per cent, its current level is wide of the recommended five per cent. The International Monetary Fund (IMF) says above five per cent arbitrage is cause for concern as it triggers roundtrip transactions, which the Nigerian market is known for.
Since the Central Bank of Nigeria (CBN) pulled the plug on the foreign exchange (FX) market, some international organisations, including the Bank of America, had expressed bullish sentiment on the outlook of the local currency.
For instance, the Bank of America (BOfA), in an earlier report, said naira had moved from being overvalued to undervalued following the long-awaited foreign exchange reform, in a June 28 note to clients.
“We now see a naira fair value of 680 per dollar (previously 580). However, naira is likely to trade above this level, with year-end N700, and a return to N650-N680 in early 2024,” BOfA analysts said.
Other experts said the currency would begin a gradual rise in value as soon as the backlog of FX demands is clear. But last week, the Economist Intelligence Unit (EIU), a global business intelligence research organisation, expressed concern about the country’s commitment to a liberalised market. It forecast that the authority, which it said lacked the experience in managing free float, would regain tighter control. According to the EIU forecast, the naira would close next year at N815/$, and plunge lower to N1,018/$ in 2027.