The Nigerian Naira has hit a new low of N910/$ at the parallel market yesterday, causing a sense of panic among traders and investors, GOOD EVENING NIGERIA reports.
The local currency’s plunge below the N900/$ psychological threshold has sparked fresh worries that its downward trajectory is far from reaching a bottom, leading to speculation that it might even reach the N1000/$ mark in the upcoming weeks.
Just a few weeks ago, the Naira was holding relatively steady at around N750/$ in the unofficial market, even as concerns about significant market arbitrage persisted.
However, sentiments took a sharp turn in the past three weeks, with the currency embarking on a downward spiral. Beginning with a drop to N800/$, the Naira’s value gradually eroded, eventually reaching N880/$ last week.
Yesterday’s trading session in Lagos saw buying and selling offers fluctuating between N900/$ and N915/$.
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In Kano, the parallel market, also known as black market, ended Tuesday at N900 per dollar, but opened on Wednesday at N919, while the I&E market stood at N750.2/dollar, emphasizing a whopping gap of about N169. And By 1 pm, Kano’s Wapa Forex Market saw the rate surge to N925 per dollar, as reported by Daily Trust.
Reports indicate that many black market participants have faced supply shortages due to the extreme volatility in trading conditions.
On peer-to-peer (P2P) platforms like the renowned Binance Exchange, the dollar stood at N900 as yesterday but surged to N923 this morning.
Interestingly, the Naira’s value remained relatively stable at the official Investors’ and Exporters’ (I&E) window, trading between N750 and N800 over the past week. The previous day’s trading session opened at ₦782.38/$ and closed at N782.59/$.
The premium for the black market, which had narrowed to almost zero after rates converged, expanded to N128 per dollar or 16 percent by evening.
Although this spread is considerably lower compared to last year’s peak of 100 percent, it remains significantly above the recommended five percent.
The International Monetary Fund (IMF) considers arbitrage exceeding five percent a cause for concern, often triggering roundtrip transactions, a phenomenon characteristic of the Nigerian market.
The foreign exchange (FX) market saw substantial changes after the Central Bank of Nigeria (CBN) intervened. Notably, international institutions such as the Bank of America expressed bullish sentiment toward the Naira’s prospects following the long-awaited FX reform.
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In an earlier report, the Bank of America (BOfA) noted that the Naira’s value transitioned from being overvalued to undervalued as a result of the reform, projecting a fair value of 680 per dollar.
BOfA analysts stated that while the Naira might trade above this level, they anticipate it could settle around N700 by year-end and then fluctuate between N650 and N680 in early 2024.
Amidst the projections of the Naira’s future course, concerns persist. The Economist Intelligence Unit (EIU), a global business intelligence research organization, voiced apprehensions about the Nigerian authority’s commitment to a liberalized market.
EIU’sforecast predicted the Naira could close next year at N815/$ before descending to N1,018/$ by 2027, reflecting uncertainties about the currency’s path.