Speculations emerged on Friday regarding the appreciation of the Nigerian naira against the U.S. dollar, both in the official and parallel markets. The naira reportedly reached one of its highest values since September when the exchange rate exceeded N1000 per dollar.
Financial analysts and parallel market traders shared insights with FIJ to shed light on the factors that might have contributed to the naira’s recent appreciation.
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Samuel Ohida, a financial analyst, disclosed that the naira was currently trading at N780 on the official exchange market and N900 on the black market. This increase in naira strength indicated improved availability of the U.S. dollar.
For some time, the Central Bank of Nigeria (CBN) had faced challenges in clearing the backlog of demand for significant currencies, including the U.S. dollar. This had resulted in a level of scarcity and a depletion of Nigeria’s foreign reserves because the Central Bank couldn’t meet the demand for dollars required by commercial banks and Nigerians.
Furthermore, the CBN lacked precise information about the amount of U.S. dollars in circulation within the country, whereas parallel market traders had access to such data and could influence prices.
The recent strength observed in the naira over the last 24 hours was attributed to the CBN successfully addressing the backlog of mature foreign currencies, leading to a more balanced supply and demand for the U.S. dollar.
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Previously, the exchange rate on the black market fluctuated between N900 and N1200, while the official rate ranged from N780 to N806. However, it now stands at N806 for the official rate and N950 to N1100 on the black market.
Another parallel market trader noted that the supply of the U.S. dollar had been gradually increasing, contributing to the naira’s appreciation. He mentioned that earlier in the week, the dollar was selling at N1350.
The trader explained that some individuals holding U.S. dollars were panic-selling, making more dollars available in the market. The increased availability of dollars was driven by both hoarders releasing their holdings and government actions.
Different speculators had various explanations for the dollar’s depreciation. Some suggested it could be linked to USDT (Binance), enabling peer-to-peer traders to set their own prices for the dollar and sell at lower rates. However, the main factor was the drop in demand and the simultaneous increase in supply, which collectively boosted the naira’s value. Nevertheless, it’s important to note that this naira appreciation doesn’t necessarily indicate an improved economy or an enhanced standard of living; rather, it’s attributed to government intervention in the foreign exchange market.
