Thursday, September 21, 2017 12:32:52 AM- Nigerian Stock Exchange.



  Psychology and the Naira appreciation to 375 against Dollar

      

March 29 (Lagos) - The CBN has slashed the rate it is willing to sell its US Dollars to banks to N 360 levels. This is because of increase in reserves, a relatively stable crude oil price and calm in the Niger Delta region.


It the two factors of crude oil and Niger Delta situation remains how it is, we can expect further appreciation in the Naira value against the Dollars.



The Naira exchange rate that declined to N 520 to 1 Dollar levels last month was a cause of shortage of supply of Dollars from CBN along with the hoard mentality of speculators who thought that they could profit by hoarding US Dollars at any rate and that Naira will keep on falling forever. 



One move from CBN brought them back to reality that there is value in the economy of Africa's largest Country. 



The rapid appreciation of the Naira in the past 2-3 weeks may as well to attributed to the human psychology of seeking safety. Those speculators who were hoarding Dollars will be eager to sell their Dollars and cut their losses. In fact they may even drive the rate lower because of their eagerness to get rid of the Dollars bought at higher rates. They will be supplying the market in addition to the CBN. 



We must applaud the CBN for finally taking these steps and catching the foreign currency hoarders off guard. The trap was set up patiently and executed swiftly. 



Now the Dollar is selling for 375 in the parallel market and we should expect that rate to come down more because of psychology of saving yourself that will be felt by forex speculators. 




reporting for easykobo.com on Wednesday, March 29 2017 from Lagos, Nigeria



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