On Thursday, foreign exchange traders in the black market recorded N33.5 kobo drop in the price of the United States Dollar (USD).
The dollar was sold in the Bureau De Change window of the black market at an average rate of N877.4/$1, compared to the previous day’s N910.9/$1 rate.
Prime Business Africa gathers that the value of the dollar has depreciated by 4.89 per cent since the acting governor of the Central Bank of Nigeria (CBN), Fola Shonubi, warned speculators could record significant losses in the coming weeks.
Why is the black market dollar rate on free fall?
On Monday, Shonubi said that the projected losses will be caused by some policies the apex bank is planning to implement to strengthen the naira against the dollar.
“Mr. President was very concerned or is very concerned about some of the goings on in the foreign exchange market and one of the things we discussed was what could be done to stabilize and improve the liquidity in the market.
“And also, the goings on in the other markets including the parallel markets, he is concerned about its impact on the average person.
“Unfortunately a lot of activities that we do which are purely local are still referenced to exchange rates in the parallel market,” Shonubi said.
“Some of the plans and strategies which I’m not at liberty to share with you may sooner rather than later cost the speculators, so they should be careful because we believe the things we are doing when they come to fruition may result in significant losses to them,” Shonubi added.
Prime Business Africa notes that since Shonubi’s statement, the dollar has been trading downward in the black market in the last four days.
Following Shonubi’s warning, the price of the United States currency has dropped by N45.2 kobo in the black market, from Monday’s average rate of N922.6/$1 to N877.4/$1 on Thursday.
What you need to know
Note that speculators usually hoard foreign exchange in hopes that the naira will experience a lengthy bearish period, which will drive the value of the dollar up in the black market.
Speculators are also usually involved in roundtripping, buying dollars in the official market and selling in the black market or hoarding proceeds of foreign export from the official market and trading them in the parallel market.
These factors have fuelled the price of the dollar and depreciated the value of the naira in the black market, which Shonubi stated is not based on pure economics of demand and supply.
According to the acting CBN chief, speculative demand from people is behind the changes in the black market. Shonubi made this known while disclosing that he has shared with President Bola Tinubu, some of the plans CBN is considering to improve the supply of foreign exchange.
“We’ve discussed and I’ve shared with him what we’re doing to improve the supply, if you look at the official market you find that that market has been fairly stable and the spreads of the difference have not fluctuated as much. We do not believe that the changes going on in the parallel market are driven by pure economic demand and supply but are topped by speculative demand from people.”
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