Naira Closes Trading At 1,100 To Dollar On Friday

By Clement Alphonsus

On the parallel market this week, the naira has lost 15.79 percent of its value to close trading at N1,100/$.

This was a 15.79 percent depreciation from the N950/$ it closed trading on Friday, last week. It was noted that last week the naira firmed up against the dollar after news broke that the Central Bank of Nigeria has begun to clear its FX backlogs.

A currency trader who only gave his name as Awolu told a correspondent that, “It is N1,100 if you want to buy. It is N1,090 if you want to sell.” Kadir, another trader, added, “It is N1050 if you want to sell. It is N1,100 if you want to buy.”

The President of the Association of Bureaux De Change Operators of Nigeria, Aminu Gwadabe, noted that the naira was depreciating steeply because of the actions of speculators.

He said, “Speculators are always looking at elements of sustainability. Once they sense that it (the injection) is not continuous, they begin to react. They begin to react. It is the reaction of the market we are witnessing. Also, there is resistance. There are people that bought at a higher price that this does not favour. People are not willing to take further losses.”

However, the naira closed the week strong on the official Investor & Exporter forex window, appreciating by 3.57 percent to close the week at N780.14/$ after opening at N809.02 to the dollar on Monday. Also, according to data obtained from the FMDQ OTC Securities Exchange, the naira appreciated by 21.73 on Friday to N780.14/$ after falling to N996.75/$ on Thursday.

Meanwhile, Economist Intelligence has disclosed that the naira is expected to close 2023 at N810/$ on the official market. According to a country report released in November, the EIU noted that after floating the naira in June, the CBN has since reverted to guiding the exchange rate by limiting access to foreign-exchange sales for banks and other dealers that quote hard currency outside a preferred rate.

It said, “The CBN lacks the firepower to adequately supply the market or clear a backlog of foreign exchange orders, valued at over $6bn, which will keep foreign investors unnerved.

“Official foreign reserves are reported at US$33bn, but up to one-third of the assets are encumbered, tied up in derivative contracts or loans. In the short to medium term, the official exchange rate will continue to be propped up by access restrictions, implying long lead times at the NFEM.”

Also, it noted that the naira would end 2024 at N822.9/$, 2025 at N1,142.5/$, and 2028 at N1,262.1/$. It stated that it does not expect lasting commitment to a market-led naira, as the apex lacks experience of conducting monetary policy under a float.

The research and analysis division of the Economist Group further explained that the decision of the government to scrap import controls on 43 imported items — while being positive for a market-led naira —will generate added demand in the formal market against limited supply.

"However, other factors undermining the naira, such as deeply negative short-term real interest rates, require an orthodox monetary policy that the authorities have not demonstrated enough appetite for. We therefore do not expect a currency float to succeed over 2024-28, although it seems likely that the fuel subsidy will end when the Dangote refinery is able to replace imports, from late 2024 onwards," it stated.