It’s official, the Naira is currently on track to ride on its longest running gaining streak against the dollar in the parallel market.
From hitting a low of N490 against the dollar the naira has since gained by about N40 to close at N454 on Monday. If it sustains this gain this week, then we are likely going to witness the longest streak of gain against the dollar in recent times.
Analysts had expected the naira to cross the N500 band by October following a downward spiral that coincided with the ban of some commercial banks by the CBN as well as a spike in demand for dollars to meet up school fees for the fall. The liquidity bit so hard it was nearly impossible to buy dollars on the black market for the same price within a space of an hour.
However, the naira regained strength after news that Travelex was going to commence operations in Nigeria and has remained strong since it commenced operations about a week ago. According to information from some BDC’s, most of the dollar scarcity on the streets are now being met by Travelex sucking away a lot of the liquidity pressures.
Information reaching Nairametrics also indicates that this situation is likely to remain the same so long as the current liquidity in the system is sustained. Our BDC contacts also reveal that they have in the past week bought dollars from Travelex and First Bank, a situation that was almost impossible when the CBN instructed commercial banks to sell to them.
According to sources, Travelex sold $15,000 at a rate of between N375 to BDC’s. With this liquidity, the demand pressure in the black market has reduced considerably forcing parallel market operators to reduce prices. Some of the operators also told Nairametrics on the phone that they expect prices to continue to drop. One of them attributed this drop to “Baba” (Buhari) insisting that he had promised to crash the exchange rate which is what we are seeing.
On whether the exchange rate might continue to strengthen, we were also informed by our BDC that they were optimistic. They opine that the exchange rate was about N445 in some parts of Abuja compared to N454 in Lagos. They believe the Naira will continue to gain against the dollar but do not see it strengthening below N400 anytime soon as Travelex is likely to sell dollars to them at N381 this week (higher than N375 of last week). However, the disparity between the black market and the BDC rate is expected to narrow. Despite these gains, the market still has about 4 different prices with the CBN rate as low as N305.
Just last week, most commercial banks sent out emails to their customers informing them that they will no longer be able to use their naira debit cards for forex transactions. The impact this will have on the exchange rate is likely to be minimal considering that the black market is not a close enough substitute to fill that gap. This could however, create another business opportunity for Nigerians with forex accounts abroad.