Forex Crisis: Hoarders urged To Convert Their Dollars To Naira

AMID predictions of a rising Nigerian economy, Nigerians who are still holding onto their stash of dollars for speculative purposes have been advised to cut their losses now and change their currency to naira.

This is in light of the fact that the naira gained to N1,250 to the dollar on Wednesday, gaining 0.8% (or N10) over the N1,260 it finished at on Tuesday on the parallel market, sometimes known as the black market.

Reno Omokri, a social commentator who sparked controversy recently by advising dollar hoarders to sell their holdings, emphasized the possibility of a rise in the value of the naira, especially given the imminent start-up of the Dangote Refinery.

Omokri stated in a post on his official X page that Nigeria's currency would be greatly strengthened by the country moving away from fuel imports and toward self-sufficiency.

Speaking to anyone who might have placed bets against the naira on the basis of negative predictions, Omokri urged them to take immediate action and forewarned of possible losses

He emphasized the Dangote Refinery's revolutionary effect on the nation's economy, particularly in light of its ability to supply a range of petroleum products on a domestic basis.

The hashtag #GrowNairaBuyNaija, which highlights the social commentator's call to action, echoes a broader mood among certain economic analysts who predict favorable changes in Nigeria's economic environment.

Though views on when and how much the naira would appreciate are still disputed, Omokri's advice contributes to the current discussion about Nigeria's economic future.

The recommendation to exchange dollars for naira makes sense as a strategic move in light of changing market dynamics and the potential for more local output and independence in the energy sector, which stakeholders are keeping an eye on.

The dollar was quoted at N1,278.58 on Tuesday, stronger than N1,309.39 closed on Thursday, the last trading day of March 2024, according to statistics from the FMDQ Securities Exchange. Meanwhile, the naira gained 2.41 percent at the Nigerian Autonomous Foreign Exchange Market (NAFEM).

The Central Bank of Nigeria (CBN) introduced a number of foreign exchange (FX) regulations to increase the supply of dollars and improve market transparency, which was blamed for the appreciation of the local currency.

The CBN eliminated market segmentation on June 14, 2023, and combined all of its reforms under the Investors & Exporters window (now known as Nigerian Autonomous Foreign Exchange). They also reinstated the Willing Buyer, Willing Seller framework.

In August 2023, the CBN started selling Forex to BDCs again, although they were only allowed to purchase and sell at a spread of up to +/-2.5 percent of the weighted average of the transactions that were completed on the I&E window the day before.

The Nigerian banks' Net Open Position (NOP) was limited by the apex bank to 20 percent short or 0 percent long holdings of foreign currency assets and liabilities as of January 2024.

Additionally, the CBN ordered the International Money Transfer Operators (IMTOs) to provide an exchange rate for beneficiaries' naira payout depending on the going rate in the market in January 2024.

Any cap on the spread on interbank Forex transactions and limitations on the sales of interbank revenues were removed by the banking and finance industry regulator in February 2024. The CBN restricted the payment of Business Travel Allowance (BTA) and Personal Travel Allowance (PTA) to electronic channels exclusively during that same month.

The adoption of these measures, according to FSDH Research, has reduced the Naira's volatility in the foreign exchange markets.

March 2024 saw a decrease in naira volatility as a result of multiple CBN policies aimed at enhancing transparency and attracting foreign exchange market inflows. The NAFEM closing rate on March 28 was N1309.4, a notable increase from its peak of N1,650 on February 26, 2024.

“We believe that the recent FX reforms coupled with high- interest rates and improved oil production will bring stability to the FX market,” FSDH analysts stated.