Naira Hits New Low As It Exchanges For N578/USD

The naira fell to its lowest point yesterday as it exchanged at NGN578/USD in the black market, while it depreciated marginally to NGN416.67/USD in the I & E window.

Nobody saw the crash on the black market coming as FX experts, traders, and analysts didn’t expect the sudden downturn of fortune.

The expensive nature of the US dollar meant two things. One is that it will definitely cost more naira to purchase a US dollar. Two, the rise will be reflected in the retail prices of everyday commodities in the market.

Traders who want to make their next purchase of imported goods will have to account for the rise in the US dollar in order to mitigate the effect of the FX risk.

The prices of everyday goods such as rice, vegetable oil, and several others, both locally produced and imported, will have to go up as accommodating the new exchange rate will have to be reflected in the new price.

However, the FX market is a zero-sum game, i.e., where there are losers, there must be winners. The unlikely winners are the BDC traders and holders of the greenback currency that are willingly exchanged for naira.

What could be responsible

The current scarcity of petroleum products, especially fuel, which was brought about by the bad fuel saga, could be partly responsible. The reason is that since many of the batches of fuel were contaminated, the companies responsible will most definitely put pressure on the FX market to get a new supply of good fuel.

As the winter season and harmattan season are fading away, importers of goods not captured in the preferred FX support list will want to replenish their stocks. As a result, there will be an increased demand for US dollars by these traders.

The statement released by the CBN governor that commercial banks will no longer be given dollars also has the potential to shift the balance against the naira.

The CBN governor stated that it wants the commercial banks to focus their energies on the export companies for FX sourcing and that they have one year before the policy comes to fruition.

When contacted, some black market traders expressed shock about the situation but said there was nothing they could do as it, unfortunately, provided them with opportunities to make money.

"Everything was going okay until the price suddenly increased. So what can we do?" Mallam Usman, a currency trader in the popular and busy Ikorodu market, asked.

We can only hope that the price returns to normality before the end of today.