New Naira Notes: Experts Blame Pushbacks From Speculators, Insufficient Forex, Others For New Fall of Naira

• There are several reasons the naira has started falling again after it bounced back against the dollar last week
• Analysts say there is pushback from currency speculators who did not like the recent move of the naira
• Others blamed CBN’s laxity in tacking dual exchange rates in the country for the new crash

The announcement by the Central Bank of Nigeria that it will begin a naira redesign jolted the market, with many rushing to hoard the dollar as a buffer.

Suddenly, the market was saturated with the local currency leading to a massive crash which left it exchanging for N900 to a dollar. The impact was the biggest in the history of money

.From worst-performing to stable and back to unstable

Reports said the naira had become the worst-performing currency in the world alongside the Ghanaian cedi.

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Many blamed the news by the CBN to redesign the naira for the massive dumping of the local currency after hoarders began to flood the market with it.

Then came the speculations that the US would reject certain dollar denominations printed below 2021.

Again, panic-buyers began another round of dumping, this time the US greenback, causing the dollar to crash against the naira despite strong showing against other currencies.

The naira rebounded by 26 per cent, exchanging for N640 per dollar on the parallel market. It was a much-needed relief for Nigerians whose currency has been whitewashed recently.

Just as hope was rising, the naira began to nosedive again. In the last week, it has lost 16 per cent of its value.

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New crash caused by speculators

Analysts say the current crash is due to another round of dollar scarcity despite the CBN pulling out $1.8 billion from reserves to defend the naira.

Emeke Okoroanyanwu, Business Editor and a financial analyst, said that the news that the US won’t reject dollar bills led to another hoarding of the US currency.

“The naira rebounding against the dollar was artificial. I knew the newfound strength won’t last because what the CBN is doing is not a lasting solution,” Okoroanyanwu said.

According to him, there is pushback from speculators who will be on the losing end if the naira continues on the trajectory.

He said the speculators are the ultimate beneficiaries of a weak naira, stating that the CBN and the Economic and Financial Crimes Commission (EFCC) should intensify the clampdown on the speculators.

“Some people are benefitting from the current situation,” he said.

Olusegun Olugbenga, a forex trader, stated that traders are always excited when the naira falls.

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“It means big news for forex traders who cash out big on the situation,” Olugbenga said, stating that the naira will continue to fall until CBN takes speculators out of the market.

Another reason analysts adduced to the recent fall of the naira is the certainty that CBN is serious with its plans to give the naira a makeover which has put a lot of people out of business.

But Abdulrasheed Bawa, the Chairman of the EFCC, said the naira would soon exchange for N200 to a dollar when the new naira notes begin circulation in mid-December.

He said the naira fell because about 85 per cent of the money in circulation was not in the banking system.

“So, you see with this redesigning, the dollar may massively fall, who knows probably to ₦200.”

Bawa said that the naira would stabilise the economy by the time Nigerians began to lodge money in the banks.

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He asked Nigerians to report anyone with money hidden anywhere other than the banks and promised a 5 per cent reward to whistleblowers.

Naira Gains 16.09 per cent amid slowed demands, increased dollar supply

Legit.ng reported that the Naira gained about N123.22 against the dollar representing 16.09 per cent in the last three days, after losing 36.52 per cent of its value in almost 11 months at the black market.

The rebounding of the Naira was due to moderation in demand amid an increased supply of dollars at the parallel market.

On Wednesday, November 9, 2022, the dollar was quoted at an average rate of N766.66 to a dollar, compared to the N890 per dollar traded on Friday, November 4, 2022, according to a BusinessDay report.

Source: Legit.ng