Forex Speculators Count Losses as Naira Sustains Gains

Speculators who anticipated a further decline of the naira against the dollar are facing significant losses as the Nigerian currency strengthens, fueled by interventions from the Central Bank of Nigeria (CBN) to address liquidity challenges in the foreign exchange market.

Since December 31, 2023, when the naira stood at N1,120 to the dollar, it experienced a downward trajectory, hitting N1,400 in January and sliding further to N1,850 in February, as predicted by some analysts.

However, contrary to expectations, the CBN’s interventions, including addressing the backlog and injecting liquidity into the Nigeria Autonomous Foreign Exchange Market (NAFEM) and bureau de change operators, bolstered the naira’s value.

As a result, the naira, which plummeted to N1,900 earlier this year, rebounded to N1,300 at the official market and traded at N1,200 to the dollar in the parallel market recently.

Jubril, a street trader in Lagos, noted the shifting dynamics, indicating that the current value of the naira reflects the CBN’s efforts to strengthen it. He emphasized the risk associated with holding dollars amidst the fluctuating exchange rates.

With speculation rife that the naira could appreciate further, possibly reaching N900/$1, speculators who hoarded dollars at lower rates face potential losses. The recent CBN intervention, selling $10,000 to each Bureau De Change (BDC) at N1,251 to the dollar, aims to enhance liquidity while regulating exchange rates.

Last week, the CBN announced the clearance of valid legacy backlogs, settling obligations to bank customers amounting to $1.5 billion, thereby bolstering liquidity in the forex market.