Emmanuel OchayiIn a turnaround, the Nigerian Naira staged a robust recovery against the dollar on Thursday, skyrocketing by 12.83% at the official market, reclaiming ground after its plunge.
“Confidence makes foreigners want to come to invest in your country and make locals want to keep their investments here. In the absence of these dynamics, demand will naturally outstrip supply, and you see the sort of instability we are experiencing now,” remarked Mr. Olatunde Amolegbe, the former President of the Chartered Institute of Stockbrokers and Managing Director of Arthur Steven Asset Management Limited.
The Naira closed at N843.07 to a dollar at the close of business, signaling a gain of N108.15 compared to its previous close at N951.22 on Wednesday.
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While this resurgence is laudable, the forex market still observed a widespread, ranging from an intraday high of N1176/$1 to an intraday low of N700/$1.
Commenting on the currency’s volatility, Bismarck Rewane, Managing Director/CEO of Financial Derivatives Company Limited, indicated concerns about lingering forex supply issues. “The dollar dearth means speculative buying is likely to continue, with an increasing number of market participants taking long positions on the dollar while shorting the naira.”
The Central Bank of Nigeria (CBN) has taken steps to address the situation, making tranche payments to 31 banks to clear the backlog of foreign exchange forward obligations and setting up foreign exchange frameworks.
Nevertheless, the parallel forex market experienced a decline, with the exchange rate depreciating by 0.68%, quoted at N1173/$1, while peer-to-peer traders quoted around N1182.48/$1.
Analysts emphasize that stabilizing the exchange rate demands bolstering market and participants’ confidence, addressing structural changes, fostering import substitution, improving security, enhancing infrastructure, and attracting foreign direct investments for sustainable economic progress.
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