Speculators fingered as naira plummets to N1,745/$1 in parallel market

The naira’s exchange rate against the dollar has experienced a sharp reversal, plummeting to around N1,745/$1 in the parallel market, a substantial decline from the sub-N1,500/$1 levels recorded just days earlier.

The downturn, occurring despite recent signs of stability, has reignited fears of ongoing currency volatility driven by speculative activities.

Late last week and earlier this week, the naira traded at approximately N1,685/$1.

However, as market activities peaked mid-week, the currency faced renewed pressure.

By Wednesday morning, December 11, several sources indicated rates consistently surpassing N1,700/$1. Observers speculate that last week’s brief gains may have been a “dead cat bounce,” a market term describing temporary recoveries in a broader downward trend.

A breakdown of rates from various platforms highlights the naira’s slide. Peer-to-peer (P2P) platforms recorded rates as high as N1,715/$1, while International Money Transfer Operators (IMTOs) quoted the naira at N1,745/$1. Meanwhile, stock trading apps such as Bamboo and Trove listed rates of N1,730/$1 and N1,736/$1, respectively.

In contrast, the official market rate closed at N1,525/$1 on Tuesday, marking the strongest rate since the introduction of the Enhanced Foreign Exchange Market (EFEM). Despite the improvement in the official window, the disparity between the official and parallel markets has widened to over N200. The gap exposes the persistent disconnect between the Central Bank of Nigeria’s managed exchange rate framework and the realities of the parallel market, where most retail transactions occur.

Bureau de Change (BDC) operators attributed the naira’s weakness to speculative activities.

Many speculators appear to be holding on to dollars in anticipation of further depreciation, undermining the Central Bank of Nigeria’s (CBN) efforts to stabilise the market through the recently introduced trading platform.

The CBN’s intervention mechanisms, which aim to provide a more transparent and robust trading environment, have yet to bridge the gap between official and unofficial rates.

However, market analysts believe that restoring confidence will require a combination of regulatory enforcement, increased dollar supply and deeper economic reforms to counteract the actions of speculators and ensure sustained stability.

Experts have said that the spotlight remains on the fiscal and monetary wings of the country to deliver a lasting solution to the naira’s volatility, which continues to hurt businesses and consumers alike.