Naira Surges N95/Dollar in Less Than a Week, Speculators Suffer Losses

Speculators are lamenting their losses as the Nigerian naira experiences a surprising surge, gaining N95 against the US dollar in less than a week. This turnaround comes after the naira reached an unprecedented peak of N950 per dollar in peer-to-peer (P2P) markets last week, causing concerns about scarcity.

The naira’s sudden strength is evident as it opens at N855/$ in the P2P market, showcasing a remarkable recovery. This newfound stability contrasts with the naira’s official market trading value of around N740/$. The alignment between the I&E FX window and the black market has diminished the appeal of speculative activities.

Nigeria’s local currency appreciation against the US dollar is attributed to an influx of supply in the foreign exchange market. NNPC Limited’s acquisition of a $3 billion loan from AfreximBank aimed at stabilizing the exchange rate has contributed to this improvement. Acting CBN Governor, Mr. Folashodun Shonubi, has also announced upcoming measures to enhance money supply and counteract naira devaluation driven by speculators.

Mr. Shonubi shared his intent to employ innovative strategies to stabilize the naira against the dollar, emphasizing the CBN’s commitment to liquidity augmentation, market stability, and addressing parallel market concerns. He revealed that market fluctuations are influenced by both economic factors and speculative demand.

The CBN identified illicit money transfers and unauthorized dollar sales by commercial banks as primary drivers of naira depreciation. To enhance transparency, the CBN introduced the Currency Price Verification System (FX) “PVS,” allowing importers to access foreign exchange and improving market visibility. Starting August 31, 2023, the Portal Price Verification Report will be obligatory for all Form M applications, reinforcing market integrity.

The CBN’s recent warning of potential penalties for forex speculators underscores its dedication to maintaining a stable market.