After July 2015: Naira starts getting stronger against the US dollar

Posted by Felix Okoli on Tuesday August 4, 2015 at 10:15:56:

The Nigerian Naira has gradually started growing stronger against the US dollar to the extent that even Nigerian banks have started rejecting foreign currency deposits into domiciliary accounts.

As at December 2014, the value of the Naira to 1 US dollar was officially about N184 while it was sold at about N190 at the black market. Prior to the general eleciton in 2015 and by April, it has further fallen to about N220 to the US dollar at the black market whle the CBN pegged it officially at about N197.

As a result of the rate at which the Naira was falling coupled with the dwindling oil revnue and scarcity of US dollars, the CBN further tried to stabilize forex rates by stopping the issuance of forex to importers who deal in certain goods.

By the time July 2015 set in, the US dollar had grown stronger to about N240 at the black market but it seemed that this would not last as the CBN forex policy on importation caused an increase in foreign currency held by commercial banks in the country and this even led to banks stopping the collection of forex from depositors so as to limit their currency risk.

It seemed that Nigerian banks would rather be more willing to give out US dollars and other foreign currencies to account holders rather than keep holding it since such funds were no longer given to certain importers who formed a major part of their client base.

It appears that the abundant availability or supply of foreign currencies such as the US dollars in the Nigerian market has caused the Naira to grow stronger a bit as it has appreciated to about N210 at the black market about a week after it was sold for N240.

Will the US dollar appreciate again? I'm not sure given that it falls and rises during different times of the year. This may mark the beginning of it's gradual decline till December 2015 after reaching a peak of N242 at Nigeria's black market.

I don't think the CBN will keep devaluing the Naira further below it's official rate of N197 and so I think they'd still maintain above N200 at the black market. If however, CBN removes their policy on importation, it may further fall again against the US dollar.