On a faithful day on the 3rd of December 2008 Nigerians woke up to a 6.58% depreciation of the Naira sending the value of the Naira down from N118 (2nd December 2008) to N126 to the dollar (the next day). It was a one day shock that reverberated around the economy with unhedged companies loosing terrible on exchange losses. By the end of December the Naira exchange at N140 to the dollar at the parallel market and was to go up to a high of N180 before receding in 2009. The rumor mill was ripe before it happened back then as those who “expected” this drastic fall in the naira blamed it on the recession and the fallen oil prices that was to follow. Fast forward to today and some are insinuating that the N5,000 bill was a sign that the CBN is about to devalue the Naira to as low as N200 to ‘reflect’ the true value of exchange against the dollar. They believe the ‘real’ exchange rate should be somewhere between N200 to $1.
Economic indices out there don’t seem to support this view now as the country has maintained a comfortable GDP growth rate, oil prices is averaging $100 and there is a cool $32b in external reserves. The demand pressures for forex however remain as the country continues to remain import dependent. As refineries remain incapable of meeting local depend for refined products imports will continue to play a leading role. Forex Supply in general has continued to outstrip demand even though sales on the WDAS has been lower than demand.
In Nigeria, rumors abound and are mostly unfounded. But when a rumor has to do with the value of the money in your pocket/bank then all precautions must be taken to avoid been on the losers side. Remain hedged.