Naira inched close to a 15 per cent gain against dollar in the parallel market within a week, trading around N820/$ in Lagos and Abuja yesterday evening.
Reliable sources informed The Guardian that traders at major market clusters were hurriedly dumping dollars yesterday as fear of a further slide in the value of the greenback gripped the market.
A trader, who confided that he was desperate and looking for an opportunity to offload his hoardings said the naira could appreciate to around N700/$ this weekend. It sustained the rising momentum seen since the beginning of the week.
Another dealer, who revealed that he was still hoarding a substantial part of what he bought at an average of N920/$ last week, noted: “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.”
But even amid panic selling, The Guardian understands that trading volume is still very low, underpinning the level of illiquidity.
Hence, many observers have dismissed the uptrend of the value of the local currency as emotion-driven as opposed to strong market fundamentals.
The Guardian had reported that about 48 hours after President Bola Tinubu and Acting Governor of the Central Bank of Nigeria (CBN), Folashodun Shonubi, held a crucial meeting on the state of the foreign exchange (FX) market, there appeared to be a breather for the troubled currency as it recorded a moderate gain, trading at about N880/$ at the black-market mid-week.
Dollar had spiked last week hitting an all-time high of N950/$ at peer-to-peer (P2P) and parallel market amid fresh concern over scarcity.
If the current momentum is sustained, official and unofficial markets could achieve parity, converging around the same value, in the coming days. At the current rates, the arbitrage has narrowed to below N100/$.
Last week, the premium on the black market hit N200 per dollar for the first time since the June market liberalisation that was aimed at harmonising the multiple exchange rates.
At the height of the crisis last year, the premium rose to 100 per cent, the highest ever recorded since the country’s return to democracy in 1999. During the military era, the margin widened to over 100 per cent, triggering wholesale widespread manipulation, with banking licences procured for foreign exchange deals.
In the popular Zone 4, Abuja, yesterday, there was lamentation, as dealers groaned over losses of over N100 per dollar in some cases.
Adamu Alhassan, who is a bureau du change operator, 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. We are not sure what to expect next.”
When reminded that the bureau de change operators enjoyed the boom while it lasted, he said: “Of course, what do you expect?”
Samuel Itodo, who came to buy dollars, was ecstatic about the gain recorded by naira in a few days and hoped it continued.
“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 said.
This is a temporary correction based on threats by the Interim Central Bank Governor to unload dollars and cause speculators to incur losses. This can only work for the short-term. It is not sustainable in the long-term because the fundamentals are still such that Nigeria cannot defend the naira due to depleted foreign currency reserve, under-utilized economy, high inflation, stable exports, stealing of oil revenues, etc. None of these fundamentals has changed overnight. The current gains by the naira is only based on sentiment not fundamentals. Thus, within a short-term, the naira will resume its spiral downward. Hold on to your dollars.