Panic As Naira Slumps To N760/$ At Black Market

Four days before the end of the Muhammadu Buhari administration, naira have lost its long-standing N750/$ resistance as it dipped to N760/$ on Wednesday.

In a chat with The Guardian on Wednesday, some dealers said there has been a surge in the demand for foreign exchange (FX) since the beginning of the week, though they could not justify the sudden spike.

But further market intelligence suggests a comeback of high-ticket transactions to the black market. Sources linked the surge to next week’s inaugurations of new governors across the country.

The Guardian, however, could not independently confirm that the large volume of transactions is coming from the political circle. Previously, past governors and lawmakers had allegedly fled the country with ill-gotten wealth immediately after the end of their tenures for fear of being arrested by anti-corruption agencies.

This is not the first time naira would lose its hold ahead of the inauguration. The 2015 foreign exchange rate crisis pre-dated the general elections but spiked weeks before the inauguration of the Buhari administration, raising concern about the correlation between dollar scarcity and the winding down of subsisting administration.

On Monday morning, naira traded around N735/$ but started loosening its hold at the close of the day. As of press time, it had lost close to four per cent week-to-date (WTD). Except for the growing demand ease, the local currency faces more downside risk.

The Guardian had earlier reported that the naira had consolidated at a narrow range – between 730-N750/$ – at the parallel market for over six months, which was about the longest stretch the local currency had traded without a major swing.

Until towards the end of last year, naira traded at a wide swing with each week setting a new price range and the rate changing thrice during some trading sessions.

At the height of the exchange rate crisis, the dollar spiked to N880/$, and politicians were reportedly mopping the market to prosecute their political ambitions

But the local currency gained stability as the year-end approached, marking the end of the high volatility witnessed in the past few years.

Since then, the currency had cooled, trading at N730-750 in what could be interpreted as an inflection point, a curve at which a change of direction is necessary.