Emmanuel OchayiThe Nigerian naira witnessed an impressive surge in the Peer-to-Peer (P2P) market, strengthening by a significant N166 against the US dollar in a few of hours.
On Thursday evening, the naira had touched a high of N1279/$, causing concerns among traders and investors alike. However, as of our latest update, the naira stands at N1113/$, showcasing a turnaround in a short period.
Join our WhatsApp ChannelThe market buzz suggests that this rally could be attributed to a shortage of buyers, as a growing number of people appear hesitant to pay the previously soaring rate of around N1300/$. It’s a trend that hints at renewed confidence in the local currency’s prospects.
Adding to the optimism, Nigeria’s Finance Minister, Wale Edun, announced that the country is poised to receive a substantial $10 billion influx of foreign currency over the next few weeks.
This injection of funds is aimed at bolstering liquidity in the foreign exchange market, a key issue that has impeded growth in Africa’s largest economy. Edun further disclosed that President Tinubu has signed two executive orders, enabling the issuance of domestic financial instruments denominated in foreign currencies and facilitating the transfer of cash from outside the banking system into banks.
What has captured the attention of traders, particularly speculators, is the anticipation that the exchange rate could continue to appreciate against the dollar in the coming days. To avoid losses, many have opted to sell at the current, more favorable rates.
President Tinubu himself assured summit attendees that he is committed to addressing the liquidity concerns in the foreign exchange market. He pledged stringent oversight of all transactions in the market, from official dealings to money changers, with a focus on curbing arbitrage. Wrongdoers will face consequences, as illicit activities in the market will be treated as criminal offenses, according to Edun.
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Recognizing that illiquidity is at the heart of Nigeria’s foreign exchange woes, the government is determined to take all necessary measures to rectify the situation. Plans are underway to streamline and restructure the foreign exchange market, ensuring that all legitimate transactions are conducted through official channels. Any activities falling outside these bounds will be met with severe penalties.
Meanwhile, in the global landscape, the US dollar reached a near one-week high against a basket of currencies. This rise was triggered by investors’ increasing preference for safer currencies following disappointing corporate results and rising US Treasury yields, which raised concerns about the economy’s state.
Tech giant Alphabet’s underwhelming performance and lower earnings from other large-cap stocks also contributed to the downturn in risk sentiment.
The dollar index, which measures the greenback’s strength against six major currencies, advanced by 0.3% to reach 106.05 points, marking its highest level in nearly a week.
Federal Reserve Chairman Powell’s speech has further added to the uncertainty, with his remarks aligning with other officials’ views that further rate hikes might be needed.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
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