Emmanuel OchayiThe Naira has orchestrated a comeback against the US dollar, creating waves across multiple markets. This represents a setback for currency speculators who had been betting against the Nigerian currency.
For the first time since August 2023, the exchange rate has plummeted below the N900/$1 threshold on peer-to-peer (P2P) platforms, including Binance, signaling a resurgence for the Naira.
On Friday evening, data from the Binance Crypto trading platform displayed an exchange rate of N855/$1. This development underscores the Naira’s recovery trajectory.
In contrast, the black market, often considered an unofficial barometer of the currency’s strength, has posted exchange rates ranging from N1000 to N1,100 for $1 in cash transactions. The urgency shown by speculators looking to exit their short positions emphasizes their anticipation of further Naira gains.
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In discussions with Prime Business Africa, dollar holders expressed their concerns over the developments, fearing financial losses for not trading the currency earlier. One worried speculator lamented, “If I had known I should have traded when the naira was over N120/$1. I hope things change soon because I do not want to lose. I don’t know if I should trade now or still wait for it to rise”
Several black market dealers have echoed the sentiment that the Naira’s rally could be linked to the recent influx of positive news reports, particularly those highlighting the government’s progress in clearing forex backlogs.
On the official front, the Nigerian Autonomous Foreign Exchange Market (NAFEM) saw the Naira closing at N776.14, marking its strongest finish since October 13th of the current year, an improvement from the previous day’s close of N793.2.
The breakthrough below the N900 threshold on the P2P market is being hailed as a psychological victory by Nigerian government officials and their supporters on social media. They had been issuing warnings for several weeks that speculators were poised to face losses, and as the Naira consolidates its strength, these predictions seem to be coming true.
The Naira’s surge can be attributed to a combination of factors, including increased foreign exchange inflows, policy interventions by the Central Bank of Nigeria (CBN), and stringent measures against illicit financial activities.
Additionally, the Federal Government stated its intention to spend $10 billion to settle FX obligations, support the country’s FX market, and stabilize the Naira. Wale Edun, the Minister of Finance, has emphasized that FX liquidity will improve in the coming weeks. He also highlighted that discussions with sovereign wealth funds willing to invest and provide advances, along with investments, are in advanced stages.
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