Two weeks after the Federal Government announced intentions to redesign the naira, the naira has rebounded 20.8 percent to 720/dollar on the black market.
Last weekend, the naira, which had been gradually sliding against the US dollar all week, hit an all-time low of 910/dollar.
However, the currency began to rebound against the US dollar on Monday, following a week-long crackdown on foreign exchange traders by Economic and Financial Crimes Commission officers in Abuja, Lagos, Kano, and other major towns.
EFCC officials seized over 90 Bureau De Change operators throughout the country on suspicion of currency hoarding and helping politically exposed Nigerians and other criminal organisations in money laundering.
The naira, which two weeks ago was purchased and exchanged on the streets of Lagos and Abuja between 735 and 745 per dollar, began a rapid slide after the Federal Government’s decision to overhaul the local currency.
The naira, on the other hand, rebounded on Monday, trading between 850 and 860 per dollar. The national currency rose sharply and steadily on Tuesday and Wednesday, reaching 720/dollar on Thursday.
Financial analysts and FX traders who talked with our reporters blamed the situation on market mood and the EFCC’s efforts.
The crackdown on forex dealers was said to have driven some BDCs underground, forcing many politically vulnerable people and currency speculators to limit their demand for the US dollar. The US currency was in high demand on the parallel market in Lagos, Abuja, and other locations.
However, Aminu Gwadabe, President of the Association of BDC Operators of Nigeria, stated that market sentiment and news of the naira redesign pushed the market in the last two weeks.
He said that the naira’s resurgence had caused several currency speculators to lose millions of naira. Many forex traders, he claims, were unaware that the naira would recover so quickly.
He said, “I can say the surveillance by the EFCC and other factors affected the market. However, I can say that some global factors also affected the market aside from the local issues in Nigeria. Don’t forget that countries like Saudi Arabia, Russia and China are taking some steps that are currently affecting the dominance of the dollar.
“But locally, I can say certain sentiments made the naira rebound and these have led many speculators to lose millions of naira. Many took a position at N800/dollar and now they are worried the currency is now N720/dollar. This was why there was some resistance in the market today with many BDCs not willing to sell their dollar at a lower amount. People who kept the greenback are now bringing it out because of certain market sentiments.”
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, noted that there had been a decline in the rush for dollars after the announcement of the naira re-designed.
According to him, this decline might have led to the rebound of the naira.
He said, “It is a very volatile situation. The immediate reaction to that pronouncement triggered some rush to convert to dollars. That round of reaction is already beginning to die down. That’s a possible factor. Once that initial rush has subsided, it is possible that the pressure on the dollar reduced.”