Traders Sell At New Exchange Rate As Dollar Crashes by Over N100 in Black Market
- The United States dollar has dropped in value by over N100 in the last month in the unofficial markets
- Forex analyst, Akeem Alabi, warns Naira's gain against dollar is temporary relief, citing uncertainty over stability
- FX trader, Omodara Babatunde, says there's no possibility of sustainable appreciation of the Naira
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Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
Nigerian currency has strengthened against the U.S. dollar in the parallel market, also known as the black market.
Information obtained from street traders showed the dollar on Monday, February 17, sold at an N1,550 exchange rate.
Source: Getty Images
The new exchange rate is a huge improvement from the N1,665 rate at the start of the month in the black market. This indicates a gain of N115 for the naira in February 2025.
Abudulahii, a trader, told Legit.ng:
"There is no much activity, demand for dollar fro us has reduced as there are more dollars available.
"We are buying dollars for N1,535 and selling at N1,550"
Another trader, who gave his name as Musa, added:
"We are patiently waiting as the market is not favorable for us now, especially for those of us who bought at a higher rate before the dollar fell."
'Naira's gain is temporary relief' - Analyst weighs in
A Forex analyst and trader, Akeem Alabi, has shared his insights on the implications of the naira's recent gain against the dollar.
Alabi, in an exclusive with Legit.ng, said the gain may have temporary benefits, but its sustainability is uncertain.
He said:
"The naira's gain against the dollar may temporarily ease inflationary pressures and reduce the cost of imports. However, the sustainability of this trend depends largely on the CBN's foreign exchange policy, external factors like oil prices, and overall economic stability."
Alabi noted that a rise in reserves could boost investor confidence, but any instability or reversal may lead to further market volatility.
For investors and traders navigating this market, Alabi recommended:
"Holding a mix of assets (including foreign currencies) can mitigate the risk of any rapid exchange rate fluctuations. Keep a close eye on oil prices, fiscal policies, and CBN's forex interventions for potential market shifts. For businesses and high-value traders, hedging positions can help manage risk amid uncertainties.”
Forex expert warns of Naira's unsustainable surge
Forex trader, Omodara Babatunde, has shared his thoughts on the gain of the Naira against the dollar.
When asked about the sudden surge, Omodara told Legit.ng that:
"Some Nigerian FX dealers are panicking, selling off their dollars out of fear. Those of us traders who are into technicals are not moved. Yes, I want the Naira to appreciate against the dollar because I'm a patriotic citizen, but I do not see the possibility of any sustainable appreciation considering the infrastructures on ground, economic policies and technicalities surrounding the Naira."
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On the technical analysis of the Naira's movement, Babatunde explained:
"I don't want to bore you with dead policies surrounding the Naira, else I would have talked about the new EFEMS policy, but let's have a look at the technicals. The Naira has not appreciated for 3 consecutive months since May, 2022! The temporary appreciation that happened in the month of March and the first few days of April, 2024 was quickly halted and that created a pattern called 'THE BULLISH DOMINANT SETUP.'”
While advising investors and traders on market navigation, Omodara broke down the current price movement, saying:
"Price only broke out of the bullish dominant setup (which is a bullish continuation setup). Price is only making a pullback to the midpoint or 78.6% of the dominant setup before the bullish move resumes. Now is the time to buy more dollars if you can (not a signal though).”
Naira's gain against dollar is a notable shift - Analyst
A Forex trader and currency analyst, Oluwaseyi Adetoyinbo, has expressed cautious optimism about the naira's recent gain against the dollar in the black market.
According to Adetoyinbo, the trend may not be sustainable in the short to medium term.
He told Legit.ng:
"The recent strengthening of the naira against the dollar in the black market is a notable shift. For this trend to persist in the short to medium term, consistent forex supply, favorable economic policies and a stable trade environment will be essential."
Adetoyinbo warned that if the appreciation is driven by short-term factors rather than structural improvements, a market correction could occur. He advised investors and traders to adopt a cautious approach, saying:
"Diversification, staying informed about policy shifts, and utilizing risk-management strategies such as forward contracts can help navigate potential volatility.”
Naira to dollar official market
It is a similar story for the dollar at the official market, as the Nigerian currency strengthened by 1.8% between January and February 2025.
The latest data from the Central Bank of Nigeria (CBN) showed that as of Friday, the naira gained N27.50, and the dollar traded at N1,511, down from N1,538.50 at the start of the month at the Nigerian Foreign Exchange Market (NFEM).
On a day-on-day basis, the local currency closed flat at N1,512 on Monday, compared to N1,511 on Friday and N1,515 on Thursday at NFEM.
Dealers quoted the highest rate at N1,515 on Monday, slightly below N1,520 on Friday. The lowest rate recorded was N1,504 on Monday, compared to N1,500 on Friday and N1,501 on Thursday.
Forex reserves fall below $40 billion
Amid the naira's gain, Nigeria’s external reserves have continued to decline as the CBN looks to clear all forex debts.
Data obtained from the apex bank revealed that foreign reserves dropped to $39.09 billion as of February 13, 2025, from $40.88 billion at the beginning of the year.
With Nigeria's oil production rising, it is expected that the current level of reserves will improve, giving the CBN more firepower to defend the naira's value.
Customs exchange rate changes
In related news, Legit.ng reported that the Central Bank of Nigeria has revised the Customs exchange rate for clearing goods at the nation's ports and airports.
The latest data reveals that the new rate represents a slight increase from the previous one.
The import duty exchange rate aligns with the naira's performance in the official foreign exchange market.
Editorial assistant Ololade Olatimehin provided exclusive commentary from Forex experts for this report.
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Source: Legit.ng
