The naira rose by 17.3 per cent on Tuesday against the dollar at the parallel market to 310 from 375, which it traded on Monday.
The naira had been on a free fall in the last two weeks, peaking at 391 against the greenback at the parallel market last week Thursday. The local currency, however, began a gradual recovery on Friday.
Foreign exchange dealers stated on Tuesday that the naira’s recovery could be linked to the gradual inflows of foreign exchange into the forex market.
“There have been inflows into the market in recent days; the central bank and oil companies have been selling dollars,” a forex dealer at Apapa in Lagos, Alhaji Saliu Mustapha, said.
Forex dealers said the local currency was set to gain further momentum in coming days, arguing that most traders were rushing to reduce the amount of dollars in their holdings.
Currency strategist at the Ecobank Nigeria, Mr. Kunle Ezun, said the depreciation the naira had recorded in the last two weeks was mainly artificial, arguing that it was part of the activities of currency speculators to force the Central Bank of Nigeria and the Presidency to devalue the naira.
He said, “The naira is recovering because of two things: The Presidency’s hard stance on not devaluing the naira and the decision of the Bureau De Change operators to peg their profit margin at 3.5 per cent. To me, these are the two things that have helped to restore stability and calmness to the market.”
An economist and currency expert at BestWorth Holdings, David James, said the naira would continue rise to a point where the true value of the local currency could be found against the dollar.
He added, “I am of the opinion that the naira’s recovery will continue to somewhere around N250 per dollar. This will likely be around the point where the equilibrium exchange rate may be found.”
But the Chief Executive Officer, Cowry Assets Limited, a research and investment advisory firm, Mr. Johnson Chukwu, believes the naira rally might not be sustainable, adding that the CBN lacked the stock of external reserves to drive an enduring stability in the forex market amid the declining global oil prices.
“This may not be sustainable; we don’t have the forex to maintain this rally,” he stated.
But Ezun said, “The true value of the naira will be found something around 290 against the dollar; and I believe that is where current rally may stop. Or sometime in the near future, it may stop around that figure.”
The economy of Nigeria has been battered by the plunge in global oil prices. The nation depends on crude oil for over 90 per cent of its forex earnings. The fall in the fortunes of the naira at the parallel market has affected companies and industries, causing economy growth to drop from 6.8 per cent to an average of 3.4 per cent.
The CBN has been rationing dollars as part of the measures to preserve the external reserves, which has hit an 11-year low of $28bn.
Meanwhile, the CBN-licensed Bureau De Change operators on Tuesday said plans were ongoing to transform their operational structure to compete in the global regulatory currency market.
The Acting President, Association of Bureau De Change Operators, Alhaji Aminu Gwadabe, who stated this at a news conference in Lagos, said the move would help the local currency retailers to increase dollar liquidity in the nation’s forex market.
He said, “ABCON will introduce a series of measures aimed at transforming the operations of the BDCs in Nigeria to align with global best practices.
“We will seek the approval of relevant monetary and fiscal authorities as well as partnerships for effective usage of the nation’s external reserves to enhance domestic trade and foreign exchange management.”
The announcement came barely six weeks after the CBN had stopped dollar sale to the BDC operators as part of the measures to preserve the nation’s fast-depleting external reserves.
The Nigerian economy has received a beating from the fall in global crude oil prices, with the naira tumbling against the dollar at the parallel market.
Gwadabe said ABCON would introduce live and real-time online currency trading platforms in the Nigerian forex market, as part of the plans to gain access to the global regulatory currency market.
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