USD rises again above N220 in Nigeria's black market

Posted by Felix Okoli on Tuesday March 3, 2015 at 16:5:17:

Demand for the US dollars in Nigeria is increasing and the matter has been made worse by recent actions by the CBN causing the greenback to appreciate as high as N223 to the detriment of the Nigerian Naira at the black market. How low will the Naira fall as the CBN closure of the retail Dutch Auction System (rDAS) window?

I recently converted some US dollars to Naira at a black market in Lagos and the first price they told me they were buying was N220 and this was not even for the new version $100 not that had the security strip. A friend of mine even said that it's now sold for N223 at the Lagos island by currency traders on the street. You can't really blame black market currency sellers for the fall because Nigerian banks are not easily giving out US dollar as they used to in the past.

As a result of the falling value of the Naira, many importers have suspended their acquisition of new stock pending when the local currency becomes stable and this situation has also caused an increase in the prices of products in Nigeria but I think it's only temporary.

I think one of the major reason for the falling value of the Naira is as a result of the upcoming election as it could be that politicians may be hoarding foreign currency or the government may be doing it to weaken the opposition or again that the CBN is planning to withdraw money from the CBN.

Over the years, Nigeria has been mostly operating a regulated foreign exchange system and it's unlikely they're planning to leave the rates floating for the long term as they seem to be doing presently. Chances are that after the elections, the CBN may again intervene by introducing a different policy that would regulate the value of the Naira to the US dollar.

At the rate at which the Naira is falling, even Fixed deposit accounts would not be safe in terms of value as what they may not have the same purchasing power now as they did in the past given that it has depreciated by a much greater ratio to the interest rates given to funds deposited in a bank. It would have been better if they invested their money in something like real estate.

As at January 11 2015, the value of one US dollar to the Naira was at about N174 according to Oanda's historical chart but as at February 16th 2015, it has increased to N204. This shows that the CBN's new policy has affected the value of the US dollar in the market.