Feb 2 (Lagos) - The Naira gained sharply against the US Dollar in the parallel market as per the websites that track that market. It recovered to 1430 levels from 1530 levels a few days ago.
The CBN moves to require Banks to sell excess Dollars seems to be having the desired effect on USD hoarders and speculators. Once that fear sets in fully, Naira could recover quickly because we already saw what happened back in November when the last time the hoarders panicked. This time the panic could be even louder because Naira has fallen so much.
The reality is that there is no shortage of US Dollars in the world. In the US, economists complain that there is too much US Dollar liquidity and that their government should stop printing so much. The Dollar scarcity in Nigeria is an artificial scarcity that has been created by a select few people who benefit from that situation.
CBN still has an ace up its sleeve which could be the last measure to crash the exchange rate. The US Dollars in peoples domiciliary accounts are running into billions. If the CBN decides that it is time to liquidate those Dollars, we could very well return to levels not seen for years in Nigeria.
The CBN could make that decision because some social media influencers are already calling for that move on X, formerly called Twitter and the public reaction was supportive of the move.
In most countries, it is not allowed for the public to save their money in a foreign currency unless they are non-residents or require the forex for business purposes. In Nigeria, people are somehow allowed to save their money in a foreign currency, so the public ends up buying Dollars and pounds. If you go to a Country like for example India or China and ask a member of the public what the US Dollar exchange rate it, he/she is likely to look confused.
Once Naira starts to recover even more, all those people who bought Dollars are going to rush to sell them and hence it will start a spiral downwards which will hurt the people that have been hurting the Naira for so long now.
So, there is yet light at the end of the tunnel. Let’s hope that recovery that Naira is starting goes a long way and we do not find ourselves here in 2 months’ time.
reporting for easykobo.com on Friday, Feb 2, 2024, from Lagos, Nigeria