Naira eyes N1,300/$ at parallel market as speculators offload FX

Local currency trades at discount on street market

Naira may be on track to regaining N1,300/$ as the dumping of hard currencies warehoused by speculators turns the foreign exchange (FX) into a buyer’s market.

The sluggish recovery of the local currency seems to have gained more speed in the past two days, with the dollar tanking to N1,400/$ on Wednesday.

As at press time, the greenback was quoted at between N1,450/$ and N1,350/$. But The Guardian learnt most traders are more interested in offloading their holdings even as end users are restrained transacting, believing there is still room for appreciation of the local currency.

Some dealers who spoke with our correspondent in Lagos said the dollar could hit N1200/$ in a matter of days even as N1,300/$ is in sight. At the current rate, naira is trading at a discount on the parallel market – exchange for a dollar at a higher rate than at the official Nigerian Autonomous Foreign Exchange Market (NAFEM).

Naira closed at N1492.61/$ at NAFEM yesterday. The rate was lower than the monthly moving average (MA). It is the first time in close to a year the official-parallel market spread would narrow to zero.

Days after the market was liberalised last year, similar parity was achieved but the arbitrage started a gradual formation that saw it reaching 50 per cent at some point.

On peer-to-peer (P2P) platforms, which the federal government blamed partly for the woes of the local currency, naira traded yesterday around N1200 for usdt, stable coin pegged on dollar at an exchange rate of one-for-one.

Binance, the global digital currency exchange, shut down its P2P after a faceoff with the government. But traders have long embraced other platforms, such as Gate.io and Kucoin.

Meanwhile, CBN may have lifted the restrictions on the importation of milk and dairy products. On February 11, 2020, the CBN added milk and dairy products to the list of items not eligible for forex.

In a notice to customers, Zenith Bank Plc said the regulator had provided an update on eligible items for foreign exchange in a notice to commercial banks dated March 12, 2024.

“Please be informed that the CBN, through its circular Ref No. TED/FEM/PUB/FPC/001/010, dated March 12, 2024, has provided an update on eligible items for foreign exchange (Non-Valid for FX).

“In light of the foregoing, please note that the restriction on foreign exchange for the importation of dairy products and its derivatives to all entities except selected companies has been lifted,” the mail read.

The Bank said any entity that meets the “necessary extant regulation requirements is allowed to source for FX at NAFEM for the transactions”.
On October 12, 2023, the apex bank lifted the ban on 43 items previously restricted from accessing forex.

“Importers of all the 43 items previously restricted by the 2015 Circular with ‘TED/FEM/FPC/GEN/01/010’ as reference are now allowed to purchase foreign exchange in the Nigerian Foreign Exchange Market.

The bank added: “The CBN is committed to accelerating efforts to clear the FX backlog with existing participants and will continue dialogue with stakeholders to address the issue.”