After Hitting Over N800 Per Dollar in the Official Market, Naira Recovers to N790.68/Dollar
- The naira recovered in the official market after falling to N848 per dollar on Tuesday, October 18, 2023
- The local currency traded for N790.8 per/$ on Wednesday, October 17, 2023, in the official market and crashed to N1,100 per dollar at the parallel market
- Experts have blamed the decision to float the naira on its fall and asked that the CBN reverse the policy
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The exchange rate between the naira and the dollar rebounded to N790.60 at the end of trading on Wednesday, October 18, 2023.
Data from the FMDQ, which quotes the official exchange rate, shows that the naira closed trading at N790.8 per dollar in contrast to the N848 per dollar recorded on Tuesday, October 17, 2023.
Source: Getty Images
CBN fails to intervene in the official market
The development suggests that the Central Bank of Nigeria (CBN) may not be in a hurry to plug the gap between the official and black market rates, contrary to its promise of intervening in the Forex market.
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An analysis of the data shows the exchange rate traded at an intra-high of N980 per dollar and higher at some point before moderating to N790.8 per dollar at the close of business.
The N848 per dollar recorded on Tuesday, October 17, 2023, was the lowest the Nigerian currency ever plunged officially.
The naira traded for an intra-day low of N701 per dollar while the NAFEX price remained at N771.94 per dollar.
The exchange rate, however, weakened at the parallel market, exchanging for N1,100 per dollar.
Buyers flood the black market in search of dollars
Legit.ng gathered from Forex dealers that the fall was due to too many people chasing the US greenback in the parallel market for imports, medical trips, and other needs.
Analysts believe that CBN’s decision to scrap the managed float of the local currency is responsible for the massive crash of the naira.
Analysts blame CBN's floating of the naira for its crash
Former Deputy Governor of the CBN, Tunde Lemo, disclosed at an event recently that the apex bank’s decision was in bad taste as there is nowhere in the world where their currency is floated in absolute terms.
He advised the apex bank to return to managed float, which former Governor Godwin Emefiele implemented.
Lemo revealed this in a virtual discourse at the Boiling Point Arena.
Punch reported that the 63-year-old Lemo said the naira should not be floated because it is not a convertible currency like the dollar, euro or the Japanese Yen, stating that the Chinese Yuan is managed.
He said:
“Why would anybody just say that we should free up naira when we don’t have the reserve level, trade, and balance of payment deficit?"
Lemo asks CBN to clear the Forex backlog
He asked the CBN to clear backlogs in the Forex market to restore confidence and boost naira’s value.
According to Lemo, the new CBN team must seek to restore confidence in the currency market, stating that issuing circulars and banning products does not provide clarity.
He stated that the development means Forex participants will not be rational.
He said the apex bank has been defaulting on most of its commitments, citing the $6.8 billion backlog of swap deals, forward deals, and commitments by foreign airlines that still need to be met.
On June 14, 2023, the Nigerian government and the CBN embarked on major economic policy reform. They unified the Forex markets when the naira officially traded for N471 per dollar and N760 per dollar on the streets.
“No More N1k”: ABCON moves to crash dollar at black market, agrees on new exchange rate
In an earlier report by Legit.ng, the Association of Bureau de Change Operators (ABCON) announced plans to bring the dollar exchange rate below N1,000/$.
Report has it that the executives of ABCON have instructed Bureau de Change dealers across the country to stop buying dollars for more than N900 from Nigerians at the black market.
The move ABCON believes will sanitize the parallel market and help the naira rebound from N1,045 to N900 or N950 in the days ahead.
Source: Legit.ng
