Naira Appreciates At Snail Speed As Dollar Floods Parallel Market

When the naira crashed to N213, many thought it might slip further down given the dwindling oil price, capital flight amidst rising political tension.

The Naira has begun to firm up against the United States Dollars again. The appreciation was induced by the influx of Dollars into the parallel market by people who hoarded their dollars to shield themselves from the Nigeria’s volatile economy due to rising political tension.

The Naira firmed up by 6.5 percent to be 200 and N197 at the parallel market. American dollars suddenly became scarce some weeks to the presidential elections.

Alhaji Hassan Mohammed at the Yaba parallel market said, “ the supply of dollars back into the market now is high, people are hurriedly selling their green backs, that is why the market is becoming flooded with dollars and the naira is appreciating, unlike the when banks resorted to them to garner more supply for their foreign demand.”

Aliu Abdul also a foreign currency trader at the parallel market also “said there will always be a reason for the naira to either appreciate or crumble, people just took advantage of the election tension to hoard dollars, the election is over and the dollars are reappearing from where they hid, whatever the case, he is still in business.

However, experts believe that the election played a huge role in the hoarding, Mr Uche Ibekwe, a lecturer at the university of Lagos said the election exposed an unstable economy that was already battling dwindling oil Price.

He said” generally, it is very natural for people to get back to business rather than leave the dollars lying idle somewhere, I think it is good for business. Although the naira rising again is dependent on the very forces that pushed it down, uncertainty was the basis for the hoarding.

The presidential election is done and uncertainty cleared, things should be back to normal but only to the extent of the oil market, whatever happens there may still happen there.”

He said he does not see the Naira heading back to N150against the greenback, but if it does, fine but it needs to be stable. DrAyadi Folorunso, an Economics lecturer at the university of Lagos said politicians are responsible for the capital flight the country recently experienced.

According to him, “they were busy doling out Dollars without creating value, already, the oil market is not favourable, then we heard rumours and identified politicians parties doing a lot with American dollars, giving it out to attract votes, this puts a kind of pressure on the naira, the naira dwindled exponentially and is now appreciating at snail speed because Nigeria is runs a monocultural economy.”

He said the worst part of the dollar craze is the unearned income where people were paid for doing nothing, when they could have added value to the economy and created additional productivity.

“Doling out money to traditional chiefs who don’t manufacture anything and will keep it idle, will not add any value to the economy, and the result will be a lot of naira chasing few dollars,” he said.

Ayadi then went on to explain that Nigeria did not get to this point in a day, he cited that the country derives foreign exchange mainly from oil, the craze for imported goods and the issuing of foreign currency for local business transactions as the major factors constantly pushing the naira down.

He said export is not strong enough to sustain the naira “look at the receipt via export and consumable behavior, once what you are getting in terms of exporting is actually lower than how much you spend to import, you create trade deficit, this exerts real pressure more so that revenue is going lower on a daily basis, OPEC is cutting its quota, the combined effect of these is what affects the naira today, we are still not getting foreign investment, the issue of mismanagement of our external reserves, when they were well built could have cushioned the effect of the naira dollar value.

Capital fight is a major impediment to stable naira dollar exchange rate. Ayadi believes that with good governance, and well-managed economy the naira can rise further, but it may not revert to the old rate.

He said the new government needs to settle down, because the naira cannot rise magically.