This is not the best of times for the naira, as continued shortage of dollars and massive demand sent the local currency to an all-time low of 504 early in the week.
The plunge coincided with Nigeria’s economy sliding into its worst recession in three decades.
A huge backlog of unresolved forex trades continue to weigh on the currency.
According to a recent CBN circular, the central bank devalued its official rates, removed “third parties” from buying FX routed through the bank’s so-called form M, and allowed diaspora remittances to be withdrawn in dollars and sold anywhere including on the black market. At the same time, the apex bank boosted market liquidity to help stabilise the currency.
The Naira gradually reacted and improved to 480/485 levels. Still, as the market remains illiquid, it is doubtful that the CBN has significant scope to further ease on its forex policies or open its reserves to the market, as it did in 2015.
READ ALSO: Naira Weakens To N500/$ At Parallel Market
The naira rate remains highly volatile and liable to react to any major flare-ups in the week ahead. For now, 500 to the dollar remains a critical support level, with 450 the resistance level on the flip side as the market’s parameters.
An economists and former President, Chartered Institute of Bankers of Nigeria, Mazi Okechukwu Unegbu, explained that the naira gain, is still marginal. He said that many dollar savers are anxious to dump the fund on buyers because the market pressure has moved from ‘buying to selling’ of dollar.
He said more people now want to offload the greenback and only very few people want to buy because they see the exchange rate as not reflective of market realities.
“For me, the naira is now a dead currency, because most people, if they have a choice will have nothing todo with it. The naira is now meant for buying and selling at the local market only,” he said.
President, the Association of Bureaux De Change Operators of Nigeria (ABCON) Alhaji Aminu Gwadabe, said currency speculators pushing the naira to forceful depreciation through their illegal activities will continue to insure losses.
Speaking to financial journalists on market development, ABCON President, Aminu Gwadabe, said forex speculators are taking huge risks with their funds, as the CBN has enough financial muscle to defend the naira and close the widening gaps between official and parallel market rates.
Although the naira has tumbled against the dollar at the parallel market, it has remained stable at N379 to dollar at the official CBN rate.
According to Gwadabe, with $35.6 billion foreign reserves, the CBN has what it takes to punish the enemies of the economy forcing the naira to depreciate through speculative activities.
According to him, the funding of Bureaux De Change (BDCs) has also helped to deepen the forex market and reduce the level of forex scarcity that always formed the basis for speculative activities.
He said that with the CBN having the needed financial strength to fund the market, the rates will soon converge to save the naira.
He said exchange rate unification will further narrow the gap between official and parallel has been canvassed by the International Monetary Fund and the World Bank because it makes for positive transparency, it makes for clarity of direction and drastically reduces speculative demand for the naira.
“I think that the CBN by pushing the official foreign exchange rate from N306, N360 to N379 to dollar is in line with market demands. It has also helped to narrow the official-parallel market rates gap that formed the basis of ridiculous speculations among unpatriotic forex dealers and spectators,” he said.
