The Nigerian Naira has sustained its “magical” rise in the foreign exchange market and is exchanging for N1,100 to the US Dollar.
On the parallel market, on Monday, April 8, 2024, there was a spread of only N20 with buyers quoting N1,000 and selling at N1,200.
This sustained increase in the value of the Naira comes with an intervention of the Central Bank of Nigeria which announced plans to sell Dollars to Bureau De Change (BDC) operators capped at $10,000 per BDC.
The question on the minds of analysts, is how the Naira is gaining value without the accompanying effects felt in the larger economy?
The Naira had earlier in the year fallen as low as N1,800 to the Dollar. That scenario seriously aggravated an inflationary crisis on the highly import dependent Nigerian economy.
The CBN had pointed fingers at currency speculators and crypto trading platforms which they claimed were arbitrarily fixing a value for the Naira.
The apex bank took measures to shut down crypto exchanges like Binance and went after their officials.
Two officials of Binance visiting the country were arrested and put on trial. The CBN through the Economic and Financial Crimes Commission (EFCC), is charging the crypto exchange with money laundering and tax evasion.
That move seemed to have staved off a swath of demand for the Dollar on the unofficial market.
What is unclear still is how the Naira has steadily gained value without a corresponding effect in the larger economy. Inflation figures are still at record high with industrial productivity which was already low, now set to be impacted by a huge increase in electricity tariffs.
The direct intervention of the CBN seems to be the only plausible explanation for the “sustained” rise in the value in the Naira.
How long and how far can this intervention go before the foreign reserves start to read warning signs?
Only time will tell. For now, the Naira is on an upbeat mode and is gaining strength on a daily basis.
