Many Bureau De Change (BDC) operators, and Forex speculators have experienced palpable fears and many of them have temporarily stopped trading the greenback over the uncertainties surrounding the sudden appreciation of the naira value with respect to the dollar in recent days.
As at last week Wednesday and Thursday, the naira tremendously weakened to a record low of N1,300 to a United States dollar over the scarcity of the greenback and continuous demand. However as at Friday one week ago, the naira strengthened to N1,250 per dollar and since then it has continued to gain value.
The pressure on the foreign exchange market eased on Tuesday and Wednesday as naira appreciated against the dollar at the official market.
On Tuesday October 31st 2023, the naira had appreciated by 10.0% in value against the US dollar in one week, further gaining N100/US dollar and exchanging at 1 USD to 1,150 NGN as against N1,250 it traded on Friday at the parallel market popularly called black market.
Bureaux De Change (BDC) operators has been reporting that the scarcity of the dollar is graduating receding and helping to strengthen the naira value across Nigeria and many of them have reported completely halting forex trading over the uncertainties and spontaneous appreciation of the naira.
BDC operators that spoke with VERY SERIAL REVIEW yesterday and today expressed fears over the uncertainties of the naira to dollar rate and told us they are not buying the greenback at the moment so as not to incur further losses. An operator by the name Alhaji Adamu spoke to VERY SERIAL this morning, he said: “At the moment we are not buying dollars as we are not sure of the current price of the dollar to naira. Many of our colleagues who bought the dollars for as much as N1,170 and N1,200 have experienced huge losses as the price is been sold between N1,110 to N1,120 for each US dollar. The current price cannot be determined as the dollar is still falling, so we are not buying at the moment, Adamu told our correspondent Friday morning.
Another Operator named Funto who sells forex in Lagos told VERY SERIAL that she is not trading at the moment as no one is certain about the current exchange rate of the dollar to the naira and every seller is afraid not to lose money as the naira value is currently appreciating. “I am not buying dollars for several days now as the price has remain unstable. If you buy, th e next day the price may fall and you will lose big,” Funto told our correspondent on Friday.
As of today Friday November 3 2023, the naira has gained tremendously 15.38 per cent in value against the US dollar, selling presently at N1,100 compared to N1,300 it sold on Thursday last week, barely 8 days ago. Analysts and Forex traders attributed the naira sudden gain to a couple of government-announced monetary policies, which has put forex speculators into an uncertain mode. Nigeria’s government has announced plans to digitalise FX transactions and discourage speculative demands and hoarding of FX in cash.
What is the Naira to Dollar Black Market Exchange Rate Today November 3, 2023?
The Naira is currently exchanging at 1 USD to 1,100 NGN at the parallel (black) market even though most of the BDC operators told VERY SERIAL that they have stopped trading in the greenback due to the uncertainties and fears of further crashing of the dollar to the naira.
Also, the Central Bank of Nigeria (CBN) has cleared an average of 75% to 80% of unsettled matured FX forward contracts in banks.
After trading on Wednesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), naira strengthened further by 3.59 percent and 17.96 percent on Tuesday.
The dollar was quoted at N786.02 on Wednesday, stronger than N815.32, on Tuesday which also was stronger than N993.82 quoted on Monday, according to the data obtained from the FMDQ.
JPMorgan Chase & Co on Wednesday had also predicted that the Naira to US dollar exchange rate will continue to appreciate in the official market and eventually strengthen towards N850 by year-end as the combination of tighter policy, as well as more attractive rates and FX levels deter incremental dollarisation and perhaps attracts some foreign capital.
This is even as JPMorgan says it expects Nigerian government and regulatory authorities to maintain a willingness for greater flexibility of the exchange rate. Though it said that while a strengthened naira against US dollar exchange rate is crucial, “the large backlog of unmet FX demand and low net FX reserves makes the job challenging”.
“The Central Bank of Nigeria (CBN) appears willing to once again allow a flexible exchange rate without the use of moral suasion to limit the upside. This was initially the case during the first attempt at re-caliberating the FX market, however those efforts lost steam due to inflation concerns.
“We believe recent efforts to restore a flexible FX regime may be sustained given the willingness to accompany it with tighter monetary conditions. The interbank FX rate has risen in recent days to over N900, from N750, thereby significantly closing the gap to the parallel rate which is now just above N1,000,” JPMorgan Chase & Co noted in its November 1 note titled “Nigeria local markets strategy: Getting set for re-opening”.
While noting that unifying the various FX windows and eliminating the longstanding list of ineligible transactions helps simplify the FX policy framework, JPMorgan said that due to still limited FX liquidity in the official market, and the fact that naira isn’t a fully convertible currency, “some FX demand will inevitably find its way to the parallel market.”
“In our opinion, when authorities refer to the FX backlog, they are actually referring to US $6.8billion in FX forward commitments which the central bank has not honored – the majority of which has been covered by commercial banks.
“However, we estimate there is up to a further $$3-4billion (probably less given the FX adjustment) in unmet FX demand needed for goods and services imports. CBN will need to clear both backlogs, a difficult task given the low levels of net FX reserves.
Before floating the naira, it traded at the official market on the FMDQ at 471.67/$ and at the parallel market at 765/$ in June.
The President, Association of Bureaux De Change Operators of Nigeria, Dr Aminu Gwadabe, said achieving stable, strong and virile exchange rate in Nigeria would require full participation of BDCs in the retail segment of the forex exchange market.
He said the challenges confronting the nation’s forex market and depreciation of the naira required cooperation from all.
The BDCs, he said, were licensed to play at the retail end of the forex market and should be fully involved in providing lasting solutions to the ongoing volatility in the exchange rate.