The sudden spirited strength of the Nigerian currency vis a vis other international currencies, especially the Green back (dollar) and the British pound sterling came to the public as a surprise. Up till last week, speculations were rife at the continued depreciation of the naira. Early in the week, a dollar exchanged for N520. By Saturday, Sunday, it exchanged for N440 in most places at the parallel market. This turn of events is a direct consequence of a slew of new policies introduced by the Central Bank of Nigeria, CBN, last week. The impact was instantaneous and the market, since then has been severely shaken.
But again this has left speculators in a quagmire. Their fingers harshly burnt as the naira has sustained its gains against the U.S. dollar on the parallel market over the weekend. It closed at N440/$, stronger than the N480 to the dollar from the previous day on renewed confidence in the forex market, gaining N85 in mere four days as a result of the new policy actions introduced by the Central Bank of Nigeria (CBN).
The sell rate of the dollar also improved to close N420/$ by the weekend, as against the N460/$ at which it closed on Thursday as speculators are wary of buying dollars at higher rate, as many have already lost millions of naira.
Friday, the Central bank pumped more dollars into the market with each BDC getting $8,000. The apex bank has pledged to sustain the supply. Investigation shows that many of the parallel market/black market operators are trying to slow down the fall of the dollar to lessen the heavy losses they are currently suffering.
Some of them had expressed frustration in the new policies as a result of the high price they had paid to buy the dollars only for the CBN’s intervention to cause them all sorts of troubles. They had bought at over N500/$ in the hope that the naira will continue to fall only for things to change dramatically over the last couple of days.
Sources within CBN have promised a “supply glut”. Accordingly, there will be enough dollars to meet demand covering all sorts of areas, including school fees and PTAs. Such supply means the parallel market dealers will suffer more loses in the days ahead. CBN on its latest forex policy entitled, New Policy Actions in the Foreign Exchange Market, on Monday, among other things, resolved to ease the burden of travellers and ensure that transactions are settled at much more competitive exchange rates and had directed all banks to open Forex retail outlets at major airports as soon as logistics permit.
Furthermore, as part of efforts to further increase the availability of Forex to all end- users; the CBN said it decided to significantly reduce the tenor of its forward sales from the current maximum cycle of 180 days, to no more than 60 days from the date of transaction.
Some financial analysts have praised the CBN for the new policy, noting that it is appropriate for the apex bank to keep amending its forex policies until it achieves its objective. Even, so the dynamism of every country’s economy would naturally necessitate constant tinkering of policy. On our part, with oil price fluctuations, production gaps and other variables, managing demand or supply end of forex is very cumbersome and volatile. This latest intervention, which has significantly improved the worth of the naira has come with a lot of relieve for ordinary folks who have had to deal with the consequences of a rising inflation and meagre income.
The relevance of dollar or its availability to the Nigerian economy is so important as though everything depends on it. All prices of goods have been affected. Even in the villages, sellers tell you that prices have gone up as a result of dollar glut. What’s more, government contracts have had to be re-negotiated as a result of galloping inflation. Prices changed as forex changed. It was that pathetic. A particular product our investigation reveals changed three times within a day as a result of forex vacillation. It was that terrible. If this gain continues, the economy will recover faster from recession.
The hope is that crude oil continues to sell better in the international market or at least maintain its present figure. Also, the Niger Delta must sustain the current peace. Therefore government must match action to words by implementing whatever it has agreed with the aggrieved. With better crude prices and sustained production levels, there will be enough dollars to go round thereby making money available to implement the budget and other social services. Prices of goods and services will drop and the economy is most likely to begin to boom in a matter of months.