Naira shows resilience, gains 1.75% against the dollar on parallel market
…As speculators take wait-and-see approach
By Sodiq Adelakun
The Nigerian Naira experienced a significant surge of 1.75 percent on the parallel market, commonly known as the black market, on Thursday.
This sudden increase in value can be attributed to the positive sentiments surrounding the government’s plans to enhance dollar liquidity in the country.
As a result, speculators have adopted a cautious approach, eagerly awaiting the government’s actions to protect their investments.
During the course of intraday trading on Thursday, the dollar was quoted at N1,120, a notable improvement from the previous day’s rate of N1,140 on the black market.
This unexpected development has sparked optimism among traders and street vendors alike. One street trader at CMS expressed their perspective on the situation, stating, “This is how we saw it. The dollar is coming down. Everybody is waiting to see what the government is trying to do so that we will not lose money.”
This sentiment reflects the general sentiment among market participants who are eagerly monitoring the government’s plans to ensure they can make informed decisions and safeguard their financial interests.
However, the federal government has outlined its intentions to bolster dollar supply and digitize foreign exchange (FX) transactions.
These initiatives aim to discourage speculative demands and the hoarding of FX in cash. By increasing dollar liquidity and promoting digital transactions, the government hopes to stabilise the currency market and minimize the impact of speculative activities.
As the government’s plans unfold, market participants are keenly observing the potential effects on the value of the Naira. The recent surge on the black market has instilled a sense of hope and confidence among traders, who are eagerly anticipating further positive developments.
The government’s commitment to increasing dollar supply and discouraging speculative demands is a step in the right direction. If successfully implemented, these initiatives have the potential to restore stability to the currency market and provide a conducive environment for economic growth.
At the Nigerian Autonomous Foreign Exchange Market (NAFEM), Naira depreciated further at the official market, losing 0.55 percent despite a 60.06 percent increase in dollar liquidity on Wednesday.
After trading on Wednesday at the Nigerian Autonomous Foreign Exchange Market, the dollar was quoted at N874.71, which was weaker than N869.91 quoted on the previous day, according to the data obtained from the FMDQ.
There was increased dollar supply from the willing buyers and willing sellers and the spot rate was N1,097.50/$1 high and N745.00/$1 low.
The volume of dollar transactions, which reflects the daily foreign exchange (FX) market turnover increased by 60.06 percent to $113.52 million on Wednesday from $70.92 million recorded on Tuesday.
The naira experienced a decline on Wednesday, reaching a rate of N1,140 per dollar in the black market segment of the foreign exchange market.
This signifies a depreciation of 5.55 percent and 8.91 percent when compared to the rates of N1,080/$1 and an average of N1,046.66 exchanged on Tuesday.
The shortage of dollars on the black market was the cause of the naira’s fall to an average rate of N1,046.66 per dollar on Tuesday.
