Naira bounces back as it appreciates to n470/$ in parallel market
The Nigerian currency [naira] this morning reversed its two weeks loss to dollar in the parallel market, appreciating by N20 to N470 per dollar. The naira had earlier depreciated by N30 against the dollar, as the parallel market exchange rate rose sharply to N500 per dollar on Monday, the 30th of November, 2020 as opposed to the initial N470 per dollar. This spiked a lot of negative reaction from Nigerians as most were displeased about the rise.
However, the new rules introduced by the Central Bank of Nigeria on Monday, November 30th, which allowed beneficiaries of diaspora remittances and foreign exchange transfers into domiciliary account, to receive the proceed in foreign currency cash, paused the dwindling fortunes of the naira.
As a result of this, the naira gained N10 against the dollar yesterday [Tuesday, December 1st] as the parallel market exchange rate dropped to N490 per dollar from N500 per dollar on Monday.
This trend continued till this morning , although on a larger scale, as the parallel market exchange rate further dropped to N470 per dollar from N490 per dollar yesterday, translating to N20 appreciation for the dollar. Therefore, the naira had reversed the N30 loss against the dollar since November the 20th, 2020.
This sharp appreciation of the naira according to Aminu Gwadabe, President of Bureau DE Change Operators of Nigeria[ABCON], shows the effectiveness of the new CBN rule receipt of diaspora remittances.
In his words; ”Certainly, those hoarding foreign exchange better sell now otherwise they will lick their wounds.” According to him, ”the monopoly of banks is broken and the policy will induce liquidity in the BDC sub-sector. It is true that the volume of diaspora remittances amidst COVID-19 is still huge. In fact, other countries like Kenya and Zimbabwe are recording higher diaspora remittances inflow as a result of skillful medical doctors abroad. Nigeria is expected to close the year with over $20 billion diaspora remittances despite the pandemic in 2020.
The beneficiary is free to collect his proceeds in foreign cash currency and trade it in the BDC sub-sector which will lead to true price equilibrium in the market.”
