Business Three Main Reasons Why The Naira is Trading Above 200 to a Dollar

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LequteMan

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Following the fall in global oil prices, the Central Bank of Nigeria on the 25th of November devalued the Naira from N155 to N168 a Dollar. However the Naira is currently trading at above N200 to a dollar. How did we get here? There are two main reasons:

CBN Policy:

Last week the CBN issued a new circular restricting the BDC and other authorized dealers from buying dollars at the Interbank. Nairametrics says this immediately caused an artificial scarcity as most BDCs did not have dollars to sell and also had very little to buy.

The interbank market also spiked as scarcity dealers held back whilst trying to figure out what their next move would be. What happened next was that those who had dollars even saw reasons to hoard it even more speculating that things could get worse. The CBN is basically not interested in defending the naira on behalf of those who buy dollars at the black market or without official documentation.


Dollar demand from Politicians:

As the elections draw near, there have been a huge surge in demand in dollars from politicians, government officials and the private sector, according to Nairametrics.

The uncertainty about who will win is making them sell a lot of their naira denominated assets sharply. They believe now matter the outcome some perceived friends of whoever loses may be victims of witch-hunting and so they are stashing up dollars just to ensure they have options,

Inadequate Dollars for Local Traders:

This is the period when traders who import goods for sale make orders as proceeds from Christmas sales fills up and waiting to be deployed for the new year. The CBN policy insists that dollar can only be sold to those with approved Letter of Credit, hereby limiting the amount of available dollars which instigates a scramble for the few remaining.


#Nigeria #Naira #Dollar #Nairametrics

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