The naira surged against the dollar on the parallel market yesterday, strengthening to N280 to the greenback from the N330/$ it closed at on Tuesday.
The local currency had exchanged at N375 to the dollar last Monday.
Having been on a downward trend on the parallel market in recent weeks, reaching an all time low of N400 to the dollar, the naira’s sudden appreciation appears to have come as a surprise to analysts who gave divergent reasons for the development.
While some attributed it to retail traders, who, anticipating a cut in the naira’s official rate, stocked up on dollars, but were forced to flood the market with the greenback after the government said it would not devalue, others alleged that the Central Bank of Nigeria (CBN) may have found a way of selling dollars to parallel market operators.
According to a Lagos-based Bureaux De Change (BDC), who spoke on condition of anonymity, “The high demand for dollars reduced in the last few days especially after President, President Muhammadu Buhari, made it clear that he would not shift his stance on the issue of naira devaluation.
“There is also speculation that the President’s visit to Saudi Arabia and other oil producing countries will lead to an increase in oil prices, which will give the apex bank more dollars to defend the naira. So, speculators are releasing dollars they have stockpile into the market in order not to make a loss.”
However, other analysts attributed the naira’s rise to the CBN’s clarification at the weekend that it had not banned the sale of forex for medicals and school fees.
Following widespread concern about the naira’s decline last week, the Acting President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said that retail currency operators were working to introduce a single quote across the parallel market and maintain a bidask spread of 3.5 per cent for trades.
“We have set up a unit to monitor compliance with the new measures,” he told Reuters, adding that the banking watchdog has been informed of the measures.
President Buhari last Saturday again rejected the idea of devaluing the naira, despite the currency’s free fall on the parallel market last week.
Gwadabe said the market was trying to adjust to the reality of no currency devaluation by the government.
The unofficial market still accounts for less than 5 per cent of Nigeria’s currency trades.
