Nigeria’s Naira has in the last few days recorded a massive gain against the US dollar at the black market after hitting a record low of N900 per $1 barely a week ago. As of Sunday, Naira was trading at N671 per $1 showing an over N200 or 28 percent rise.
Naira fell at the black market after the announcement of the proposed plan by the country’s Central Bank to redesign banknotes. Many Nigerians who had stashed cash over the years and do not want to fall under the radar of the country’s financial agencies if they deposit their stash of cash opted to convert the Naira to dollars.
Reasons for the Naira gain
According to several interviews conducted by media outlets in the country, bureau de change traders or black-market operators have attributed the recent rise of the Naira to reduced demand and increased influx of forex into the black market.
- Unconfirmed sources have said the increased influx of forex into the black market is due to a new directive by the US to stop the acceptance of dollars printed below 2021. Reports have it that by this directive the US checkmates the stockpiling of dollars in Africa.
- While this is unconfirmed, the mere speculation has reduced demand and increased the influx of forex into the black market.
- Nigeria financial agencies have also begun raiding bureau de change hubs across the country.
But is the recent Naira Gain Sustainable?
While in the short term, the mix of rumors and action by the financial agencies may have prevented a further forex crisis even though the official rate and black market rate is still wide apart, it doesn’t solve Nigeria’s forex crisis which has forced Nigerians to patronize bureau de change traders in the first place.
- Nigeria has fundamental economic problems such as lack of revenue sources, rising debts, lack of capital investments and so on; all of which can cause long term changes on exchange rate.
- Ultimately, Nigeria needs to take more proactive actions such as improving exports to make the Naira gain sustainable.