...By Lola Smith for TDPel Media.
Naira, the Nigerian currency, has experienced a significant drop to N760/$ on Wednesday, just four days before the end of the Muhammadu Buhari administration.
Forex dealers reported a sudden surge in demand for foreign exchange (FX) since the beginning of the week, although they couldn’t provide a clear explanation for the increase.
Market intelligence indicates a resurgence of high-value transactions in the black market, with sources linking it to the upcoming inaugurations of new governors across the country.
It is important to note that The Guardian was unable to independently verify whether the increased transaction volume is predominantly from the political sphere.
However, in the past, there have been reports of former governors and lawmakers leaving the country with allegedly acquired illicit wealth immediately after their tenures, out of fear of being apprehended by anti-corruption agencies.
This is not the first time that the naira has experienced a weakening before an inauguration.
A similar foreign exchange rate crisis occurred in 2015, preceding the general elections but intensifying weeks before the inauguration of the Buhari administration.
This raised concerns about the connection between dollar scarcity and the winding down of an existing administration.
On Monday morning, the naira was trading around N735/$ but began to lose its strength as the day progressed.
As of now, it has experienced a nearly four percent decline week-to-date (WTD).
Unless there is a reduction in the growing demand, the local currency faces further downside risks.
Earlier, The Guardian had reported that the naira had maintained a relatively stable range of 730-N750/$ in the parallel market for over six months, representing one of the longest periods of trading without significant fluctuations.
Prior to this period, the naira experienced frequent swings in value, with new price ranges being set every week and exchange rates changing multiple times during trading sessions.
During the peak of the exchange rate crisis, the dollar reached an exchange rate of N880/$, and politicians were reportedly dominating the market to support their political ambitions.
However, as the year came to a close, the local currency gained stability, signaling an end to the high volatility witnessed in previous years.
Since then, the currency has remained relatively stable, trading within the range of N730-750.
This phase could be seen as an inflection point, indicating the need for a change in direction.
