Naira crashes further, trades as low as N910/$

By Sodiq Adelakun

The Naira fell as low as N910 against the dollar on Wednesday morning before moderating to the N902/$ levels.

Nigerians access this dollar-backed on the P2P market primarily for hedging and transactions.

The platform enables many young and tech-savvy people to convert their naira into these stablecoins denominated in dollars, making it simpler for them to send and receive money from abroad, buy goods and services, and process transactions more efficiently than Nigerian banks.

However, the market is largely unregulated and poses significant risks.

“Nigeria’s FX market will continue to be in focus given the true value of its net FX reserves, with an overall balance of payments deficit pointing towards continued FX pressure, which also noted that Nigeria’s FX reserves are” significantly lower than prior estimates, owing to larger-than-expected currency swaps and borrowing against existing reserves.

Short sellers are holding their ground against the naira even as the number of cash held outside banks dropped significantly from N2.26 trillion in June to N2.20 trillion in July.

…FX Pressure and Regulatory Efforts

To stabilise the naira and curb inflation, the CBN has introduced several measures, including raising the banks’ cash reserve ratio (CRR), opening market operations (OMO), and changing the exchange rate regime.

While the market rallied on the news, it appeared to be short-lived support as the local currency subsequently fell against the dollar in the following segments.

The Naira has been falling steadily since FG/CBN announced the Naira float. It lost nearly half its value against the US dollar within 10 weeks of its introduction.

The country’s apex bank reaffirmed its commitment to achieving price stability and exchange rate stability, but given the structural and budgetary difficulties the economy is experiencing, economists have expressed scepticism about the CBN’s capacity on its limited FX ammunition.