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Naira Nosedive: President Tinubu’s Optimism Clashes with Currency Crisis

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Nigeria’s President Bola Tinubu brought his message of optimism to the New York Nasdaq exchange this week, calling on investors to “be confident in Nigeria.”

However, his spirited demeanor contrasts starkly with the growing unease on the streets of Nigeria, where confidence in the national currency, the naira, is eroding rapidly.

On Thursday, the naira hit a historic low, and currency traders tracking the exchange rate predict it is teetering on the edge of reaching a 1000-per-dollar exchange rate on the parallel market. The naira’s value has fallen nearly 30% below its official rate on the FMDQ OTC trading platform as both individuals and businesses scramble to acquire U.S. dollars.

Ogho Okiti, Chief Executive of ThinkBusiness Africa, a Lagos-based advisory and data services firm, described the current situation as a “demand for foreign exchange stampede,” noting that the demand extends beyond imports to the preservation of value.

The recent plunge in the naira has dampened much of the optimism generated by President Tinubu’s reform program, which he unveiled shortly after taking office in June.

His initial promises included unifying the complex exchange rate system and abolishing costly fuel subsidies, which initially sent Nigerian markets soaring.

During his speech in New York, President Tinubu reaffirmed his commitment to these reforms, assuring investors that bottlenecks had been removed and the exchange rate had been stabilized. However, market experts have a different perspective. Many attribute the naira’s decline to the central bank’s failure to supply dollars to the official market, leaving buyers no choice but to turn to street traders for foreign currency.

This divergence has dramatically widened the gap between the parallel and official exchange rates, which had initially converged after Tinubu’s inauguration.

Market players argue that authorities are not allowing the foreign exchange market to function as a “willing buyer, willing seller” platform, as they had promised.

Ayo Salami, Chief Investment Officer at Emerging Markets Investment Management Ltd. in London, stated, “With the current restrictions in the FX market, it is not possible to form a realistic judgment on the value of the naira.”

Concerns about reforms have grown further, especially after Tinubu was compelled to suspend a planned gasoline price increase last month. Hopes for a prompt and substantial interest rate hike to stabilize the naira were dashed by the central bank’s announcement that next week’s policy meeting would be postponed indefinitely.

Currently, interest rates stand at 18.75%, while inflation approaches 30%.

Moreover, the confirmation of the central bank’s new governor, former Citigroup executive Olayemi Cardoso, is pending. This delay, along with the resignation of the acting governor and four deputy governors, has created a policy-making vacuum at the highest level.

Foreign investors remain cautious about investing in local assets due to fears of exposure to a depreciating naira and concerns about capital withdrawal. The authorities have also yet to clear a backlog of hard currency arrears totaling billions of dollars owed to foreign companies and investors.

The naira’s decline has also affected Nigerian dollar bond markets, with issues maturing in 2033 falling more than half a cent on Thursday to 76.5 cents, a significant drop from end-July highs. While the Lagos stock exchange closed slightly lower for a second consecutive day, it still hovers near the 15-year highs reached soon after Tinubu’s inauguration.

Segun Agbaje, CEO of Guaranty Trust Holding Co., summed up the situation, saying, “People are not going to come in until they’re sure that there is a certain amount of stability around the exchange rate, and that’s where we are.”

Foreign investors and Nigerians alike will be closely watching how President Tinubu’s government navigates these economic challenges in the coming months.

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Naira

Naira Appreciates to N1,666 Per Dollar at FX Market, N1,704.11 at Parallel Market

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Naira Exchange Rates - Investors King

The Naira appreciated by 0.5 percent against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday following an N8.77 rise to close at N1,666.72/$1 compared with Thursday’s closing rate of N1,675.49/$1 despite worsening supply in the market.

The daily supply of FX as measured by secondary data from FMDQ Securities Exchange Limited indicated that turnover fell by $72.41 million or 43.5 per cent to $94.20 million from $166.61 million.

However, the local currency slid on the Pound Sterling and the Euro in the final session. For the British currency, the local currency depreciated by N10.10 and closed at N2,157.25/£1 from N2,147.15/£1 while it closed at the rate of N1,814.79/€1, a slump of N23.43 against N1,791.36/€1 against the Euro.

Meanwhile, the Naira rose further by N7.66 against the American in the parallel market segment to close at N1,704.11 to the US Dollar compared to N1,711.77/$1 it closed on Thursday.

Also, the domestic currency extended its gain against the British currency during the final session as the Naira made a further appreciation of N16 to trade at N2,207.76/£1 from N2,223.76/£1 that it sold at the previous session and against the Euro, it appreciated N14.82 to close at N1,852.25/€1 versus the previous day’s rate of N1,867.07/€1.

The local currency gained a marginal N1.62 to close at N1,233.99 per Canadian Dollar, compared to Thursday’s N1,235.61 per CAD.

The Central Bank of Nigeria (CBN) at the recently concluded World Bank/IMF meetings held in Washington, DC last week said the foreign exchange market will not depend on the apex bank’s intervention for supply and stability.

This is evidenced by the stop of sales of Dollars to the market as it plans to improve supply organically without its intervention from time to time while maintaining balance in the market.

“While you might see us intervene from time to time, we are trying to ensure the market is not dependent on the intervention of the central bank.

“I think that we are looking at conditions that market return as much as possible to improve supply organically without the Central Bank having to put in money all the time,” the CBN deputy governor on economic policy, Mr Mohammed Abdullahi, disclosed.

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Naira

Naira Loses 2.7% on Dollar at NAFEX, Gains N6 to N1,711/$1 at Parallel Market

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New Naira Notes

The Naira fell by 2.7 percent on the US Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEX) to exchange at N1,675.49/$1 on Thursday, October 311 as the local currency depreciated despite a slight increase in supply.

In the official market, the domestic currency lost N44.32 on the American currency in the official market versus N1,631.17/$1, which it closed in the previous session on Wednesday.

In a turn of fortune, the Naira rose N6.66 against the greenback in the parallel market segment to close at N1,711.77 to the US Dollar compared to N1,718.43/$1 it closed on Wednesday.

Data showed a rise in supply as the turnover published on the FMDQ Group website stood at $166.61 million indicating that the session’s turnover jumped by 29.2 per cent, indicating a rise of $37.63 million compared to $128.98 million that was published in the last trading session.

Equally, the Naira weakened its value against the Pound Sterling in the official market by N3.75 to sell at N2,147.15/£1 compared with the preceding session’s N2,143.40/£1.

It followed the same path against the Euro, depreciating N9.29 to quote at N1,791.36/€1 versus midweek’s closing rate of N1,782.07/€1.

In a different outcome in the black market, the domestic currency headed up against the British currency during the Thursday session as the Naira made an appreciation of N10.86 to wrap the session at N2,223.76/£1 from N2,234.62/£1 that it sold at the previous session.

However, the Naira followed a different pattern against the Euro as it depreciated N12.51 to close at N1,867.07/€1 versus the previous day’s rate of N1,854.56/€1.

The local currency gained a marginal 9 Kobo to close at N1,235.61 per Canadian Dollar, compared to Wednesday’s N1,235.70 per CAD.

Investors King reports that the Nigerian macro environment is placing pressure on the FX market with latest data showing that there is a high money supply in the system complemented by a wider government budget deficit.

The Central Bank of Nigeria (CBN) revealed that Nigeria’s money supply often known as M3 grew 62.8 percent in the last one year to N109 trillion from N66.9 trillion in September 2023.

 

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Naira

Naira Declines Amid Dwindling FX Supply as Official Rate Nears N1,631 per Dollar

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Naira Exchange Rates - Investors King

The Naira depreciated against the US Dollar at both the official and parallel foreign exchange market segments on Wednesday, October 30.

The Naira dropped 0.04 per cent in the Nigerian Autonomous Foreign Exchange Market (NAFEX) The local currency lost 72 Kobo to close at N1,631.17/$1 at the official window.

According to data obtained from FMDQ Securities Exchange compared to N1,630.45/$1 published in the preceding session on Tuesday.

This happened as supply decreased at the FX market as secondary data showed that $128.98 million worth of turnover was recorded compared to the preceding session which $242.59 million was settled. This indicated a $113.61 million or 46.9 per cent slump.

In the black market, the Naira lost N4.08 against the greenback to close at N1,718.43 to the US Dollar compared to N1,714.35/$1 it closed on Thursday.

Meanwhile, the local currency appreciated against the Pound Sterling and the Euro in the midweek session for the week. For the British currency, the local currency appreciated by N18.57 and closed at N2,143.40/£1 from N2,161.97/£1 while it closed at the rate of N1,782.07/€1, a jump of N18.90 against N1,800.97/€1 against the Euro.

In a different outcome in the black market, the domestic currency headed south against the British currency during the midweek session as the Naira made a depreciation of N9.38 to wrap the session at N2,234.62/£1 from N2,225.24/£1 that it sold at the previous session

However, the Naira followed a different pattern against the Euro as it appreciated N15.38 to quote at N1,854.56/€1 versus the previous day’s rate of N1,856.79/€1.

The local currency dropped N2.31 to close at N1,235.70 per Canadian Dollar, compared to Tuesday’s N1,233.56 per CAD.

The supply challenge in the FX market comes as the Central Bank of Nigeria (CBN) continues to filter sales into the market alongside recommendations from the World Bank.

The US-headquartered bank in its latest report noted that permitting market participants to trade FX with more flexibility across time would also contribute to deepening the FX market, adding that the CBN should continue efforts towards deepening the official FX market.

This includes facilitating formal remittance inflows, allowing international oil companies to fully concentrate their FX sales in the official market, restoring intermediated market access to bureaux de change, and refraining from ad-hoc FX auctions.

“Allowing market participants to trade FX with more flexibility across time would also contribute to deepening the FX market,” the October report said.

 

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