Naira heads below N1000/$ as dollar flows drive sentiments

The Naira is poised to strengthen to below N1,000 per dollar on the parallel market next week, following positive sentiments around the Federal Government’s plans to shore up dollar liquidity in the foreign exchange (FX) market.

“There are enough dollars in the market now. What we are seeing is that people are no longer hoarding and that has increased liquidity in the market,” Abubakar Ibrahim, an FX trader, said Friday.

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“At this rate, the dollar could crash to below N1000 next week,” Ibrahim said.

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The local currency has in the last few days appreciated against the dollar, gaining 22.13 percent (N290/$) as the dollar fell to N1,020 on Friday from a peak of N1,310 on Thursday last week on the black market.

Street traders were already buying dollars at the rate of N980 on Friday as against N1,130 on Thursday. Speculators who have been hoarding dollars for arbitrage are now offloading the same to avoid losing money.

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Before now, people were buying dollars for future needs like school fees ahead of January when foreign schools resume but with the government’s efforts to increase dollar supply, demand has reduced on the expectation that the rate will drop soon.

Muda Yusuf, chief executive officer, Centre for the Promotion of Private Enterprise, attributed the naira resurgence to inflows from oil swap agreements and loans.

“The government has told us the steps they are taking to improve liquidity. They talked about NNPC, swap or forward sales, which were to bring about $3 billion, recently they talked about $10 billion expected into the economy,” Yusuf said.

“So, it is possible that some of those things have started to trickle in and just as they said, their priority is clearing off the backlog in order to begin to restore confidence in the system. I think that is what is happening,” Yusuf added.