Market News

Naira faces downside risks, slumps to N760/$ at black market - THE GUARDIAN

MAY 25, 2023

By Geoff Iyatse

• Demand for dollar surges ahead of inauguration as big-ticket demands return
•Dollar scarcity, regime change correlation gains attention

Four days before the inauguration of a new administration, naira seems to have lost its long-standing N750/$ resistance as it dipped to N760/$ yesterday.

The market may have started pricing in uncertainty risk that comes with a change of national economic managers. Some dealers told The Guardian yesterday that there has been a surge in the demand for foreign exchange (FX) since the beginning of the week, though they could not justify the sudden spike.

But further market intelligence suggests a comeback of high-ticket transactions to the black market. Sources linked the surge to next week’s inaugurations across the country.

The Guardian, however, could not independently confirm that the large volume of transactions is coming from the political circle. Previously, past governors and lawmakers had allegedly fled the country with ill-gotten wealth immediately after the end of their tenures for fear of being arrested by anti-corruption agencies.

President Muhammadu Buhari will leave office on Monday alongside 44 ministers and retinue of aides who have held on to power in the past eight years.

Across the country, 18 governors will also hand over the batons of the political leadership of their states beginning next week as their successors take the oaths of office.

Members of the National Assembly and 36 parliaments will also be inaugurated days after the executives take over the reins of office. Some of the outgoing public officials (some of who are covered by the immunity clause), The Guardian was informed, are on the watch of the Economic and Financial Crimes Commission (EFCC).

A source privy to details of some of the investigations said the EFCC is reviewing dossiers of petitions, some of which may be politically motivated, and that some governors may have been under close watch.

“Whether there are petitions is not a question but how many of them are viable? If you understand the number of public officials that are leaving office soon, you will be surprised that there is so much jittery in the political space,” the source said.

Dating back to the pre-election era, the pages of newspapers are rife with accusations and counter-accusations of fraud and misappropriation of public resources. Different officials have also been involved in phony projects to have been conduits of siphoning state resources.

This is not the first time naira would lose its hold ahead of the inauguration. The 2015 foreign exchange rate crisis pre-dated the general elections but spiked weeks before the inauguration of the Buhari administration, raising concern about the correlation between dollar scarcity and the winding down of subsisting administration.

On Monday morning, naira traded around N735/$ but started loosening its hold at the close of the day. As of press time, it had lost close to four per cent week-to-date (WTD). Except for the growing demand ease, the local currency faces more downside risk.

The Guardian had earlier reported that the naira had consolidated at a narrow range – between 730-N750/$ – at the parallel market for over six months, which was about the longest stretch the local currency had traded without a major swing.

Until towards the end of last year, naira traded at a wide swing with each week setting a new price range and the rate changing thrice during some trading sessions.

At the height of the exchange rate crisis, the dollar spiked to N880/$. The Guardian reported that whereas politicians were mopping the market to prosecute their political ambitions, speculators had turned the currency into an article of trade.

But the local currency gained stability as the year-end approached, marking the end of the high volatility witnessed in the past few years.

Since then, the currency had cooled, trading at N730-750 in what could be interpreted as an inflection point, a curve at which a change of direction is necessary.


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