The naira, which has been falling against major currencies in the past two weeks, has staged a comeback, recording gains on the parallel market as it exchanged for about N730 to a dollar on Thursday.
Recall that the Nigerian currency hit an all-time low of about N850 to the US dollar on the black market shortly after the Central Bank of Nigeria (CBN) announced plans to redesign high-value currency notes of N200, N500 and N1,000 and reissued from December 15.
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CBN said the affected currency notes will cease to be accepted after January 31, 2023, and asked currency holders to pay their currency notes to the banks before then.
While some have begun paying their hordes of naira notes into banks, many have sought refuge in the dollar, mopping up the dollar bills from Bureaus de Change, to preserve value.
In Lagos, black-market traders attributed the recovery of the naira to its scarcity, saying this was responsible for the inability of speculators buying dollars to offer higher rates for the green back.
“There is no naira in the system,” one currency dealer told Daily Trust in Central Lagos District, the heart of the financial market.
He said the dollar had risen to N730, but said if a seller wants naira to be paid into his bank account, it would be done at a lower rate of N700. In Port Harcourt, a dealer priced the dollar at N700 but demanded N720 to sell dollars to buyers.
In Abuja around the Zone 4 area, some BDCs recalled the drop in patronage of the dollar over varying accounts of information.
According to Umaru Abu, “People are scared that with recent information that the US is rejecting the $100 bill, buying the dollar could be a risk, but we have now heard from CBN officials that it is not true.
“Some of my colleagues said maybe people are buying more assets due to the CBN naira redesign policy and are cutting down spending in dollars. But we have observed some drop in patronage since Tuesday evening,” he noted.
In the meantime, the Institute of Chartered Accountants of Nigeria (ICAN) is worried about the pressure the naira is facing from the US dollar.
A dollar exchanged for about N780 to N820 in the parallel market earlier, far above the around N450/$ official rate, due to insufficient supply, which has implications on inflation and the sourcing of raw materials and services.
ICAN president, Mallam Tijjani Isa, stated this on Thursday in Lagos during a briefing to commemorate the International Accounting Day 2022.
“As a nation, we must find a permanent solution to the forex crisis if we are to develop at the desired pace,” he said.
The president in the company of the Chairman, Body of Past Presidents of the Institute, Dr Sir Ike Nwokolo, led other members to embark on a health walk among other activities to commemorate the International Accounting Day 2022.
Naira gain may be short-lived – AZA
While the latest firming of the naira against the dollar could be good to tame the rising inflation, analysts say the recovery by the local currency is unlikely to be sustainable, noting the flight into the dollar will resume.
“While Nigerian bureau de change operators have confirmed reduced demand at current parallel market levels, we expect dollar appetite to pick up again in the coming days and the naira to resume its recent slide,” AZA Finance wrote in a note to clients on Thursday.
The CBN has set limits to acceptable amounts of cash deposits into accounts, warning that it would monitor such transactions in conjunction with the Economic and Financial Crimes Commission.
Since then, the EFCC has raided the offices of bureau de change operators and black-market currency traders in Abuja, Lagos, and other towns.