Naira Weakens to N1,745 at Black Market as Speculators Game EFEMS Loophole

The exchange rate between the Naira and the US Dollar appears to be falling as of Wednesday afternoon to around N1,700/$1 on the parallel market.

This has seen the local currency face a reversal after trading at N1,500 per Dollar levels at the beginning of the week.

Several rates viewed by Investors King showed that around N1,715 to N1,745 per Dollar as of mid-day.

Meanwhile, the FMDQ Securities Limited exchange rate in the official market closed at around N1,525/$1 on Tuesday, the strongest close since the introduction of the Electronic Foreign Exchange Matching System (EFEMS), an electronic platform introduced to tackle speculation and improve transparency in Nigeria’s foreign exchange market.

In a circular announcing the EFEMS platform, the Central Bank of Nigeria (CBN) explained that it facilitates spot foreign exchange transactions between the Naira and the US Dollar.

In recent days, speculators holding foreign currencies, particularly the US Dollar, saw the value of their money drastically drop due to the appreciation of the local currency. This forced them to dump FX into the system and take the domestic currency alternative.

Data from the FMDQ Securities Exchange showed that the value of forex transactions significantly increased yesterday by $228.85 million or 257.2 per cent to $401.17 million from the preceding session’s $112.32 million.

However, with the Naira now facing increased pressure, this may lead to the rates dropping especially with the Christmas period around the corner.

Market analysts also noted that the gap between the official rate and the parallel market rate could be caused by other speculators, who are buying cheaper at the official market and then selling higher at other segments of the market in order to game the system.

Despite the robust trading platform, these speculators may have found a loophole, a trader shared.