Naira heads towards N500/$1 | Nigeria News Today. Your online Nigerian Newspaper


Nigeria’s foreign exchange market was tension-soaked yesterday, as the Naira raced towards N500/USD1. 

It closed at N490/ USD1 in the parallel market, with dealers expecting further rise today to hit the dreaded N500 mark. Surprisingly, the Naira appreciated significantly to N305/ USD at the official interbank market same day, although dealers said foreign exchange was not available to most of the bids.

Meanwhile, the global investment bank, Morgan Stanley of United States of America, has warned that its MSCI Nigeria Indexes would be reclassified as Stand-alone next year, if currency restriction was instituted by the Central Bank of Nigeria, CBN.

Also the World Bank said, yesterday, that Nigeria and South Africa would drag down Africa’s growth rate by 1.6 per cent in 2016, as strings of negative economic indicators continued. Naira exchange rate had been on speedy downwards against major international currencies in the past few days, dropping from N425/USD a week ago to the current level which showed about 15.3 per cent depreciation week-on-week, the fastest so far since the June 2016 official devaluation.

Why the latest crash?

Dealers blamed the development on scarcity of foreign exchange, occasioned by CBN’s inability to intervene with significant quantity of foreign exchange. However, a new environment of speculation appears to have taken hold of the market as most dealers are now hoarding whatever they have, while hiking the rate against a speculated depreciation.

One of the dealers in a commercial bank stated: “The trend since this week has been driven by speculations that Nigeria was running out of reserves as real demand continues to grow faster than supply.

“Dollar is very scarce in the market right now because many people do not know how low it will fall in the near term, so people are holding on to their hard currencies in order to watch the direction of the market.” There is also report that traders in Nigeria and from neigbouring countries are swelling the crowd of speculative purchase of US Dollar in Nigerian markets.

President of Association of Bureau de Changes in Nigeria, Aminu Gwadabe, told Reuters: “Traders from neighbouring countries and some importers had also been moving in recently, mopping up dollars and putting pressure on the Naira in a possible speculative bid.”

So what's the way out?

Speaking to newsmen on the renewed pressure on exchange rate, Chief Economist and Head of Research at FSDH Merchant Bank Limited, said: “The major driver is the plunging oil receipt on account of low oil price and production.

“Recall that oil exports had dominated our foreign exchange earnings in the last few years accounting for more than 70% of our export proceeds. ‘’The Foreign Direct Investment (FDI) has also dropped drastically because of no clear policy direction on the part of the government.

 ‘’The International Oil Companies (OICs) have stopped investments because of no clarity in respect of Petroleum Industry Bills (PIB). The Foreign Portfolio (FPIs) have also dropped drastically because of foreign exchange instability and weakness in the economic fundamentals of the country.”

On the way out of the forex crises, he stated: “The monetary authority should ensure that it does not bow to the current pressure to reduce the interest rate. ‘’If the yields on the fixed income securities are above the inflation rate, foreign portfolio investors, FPIs, may soon be bringing investments to Nigeria and thus increase the supply of forex. “Also the fiscal authority should communicate clear policies to drive the economy so that private investments (both local and foreign) can come in.

“Government should also ensure that the Petroleum Industry Bill, PIB, is passed so that the IOCs can have a clearer direction of what to expect. “This will stimulate investments in that sector and ensure that foreign exchange flows in. Government can also consider selling the proposed 5% stake in the NLNG through a transparent process.

“The CBN has been managing the exchange rate at the interbank market so that it does not move so much beyond a particular range. This gap may continue until there is adequate supply at the inter-bank market. “The implication of all these is continued increase in local prices worsening economic performance.”

Earlier this week CBN appeared to have renewed its restriction measures on access and usage of independent foreign exchange resources following which commercial banks sent out e-mails to their customers reflecting the guidelines.

“All customers of financial institutions are expected to only use their accounts for their direct personal/company related transactions.

“No customer of any financial institution is permitted to engage in any activity that could be perceived as international money remittance service (IMTO) or bureau de change (BDC) activities without the express approval of the CBN,” the e-mail said.

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  1. Oil! Oil!! Oil!!! Why not turn to Lake Chad and Lagos oil deposits? Better yet, kill Niger Deltans for it.

  2. Change dole!
    Sai Baba!
    $1 is now 1Naira
    Sai Baba!
    I will now trek back to Lagos for Baba because this change sweet me well well.
    Oh na Jonathan Lord Lugard and Colonial masters and PDP 16 years cause am.


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