CEM REPORT, FINANCE | Exchange rate market for the week was highly volatile being dominated by speculations fueled by uncertainties that surrounded the whole economy as investors and indeed Nigerians awaited the outcome of the presidential election at the supreme court.
The week opened with the continued weakening trend of the naira from the previous week. The dollar exchanged against the naira at the rate of N1,233 at the BDC market, hopping from N1,179 from the end of the previous week.
The upward movement of dollar continued through to Friday. It increased to N1,290 on Tuesday, a 4.6% increase from the previous day and sustained the increase on early Wednesday to N1,297 before easing slightly to N1,296 at the close of the market.
Thursday saw a slight upward movement to N1,298 which later crashed to N1,292 shortly after the Supreme Court judgement. With the passing of the judgement, there seems to be return of confidence on the market which resulted to the easing of rate at close of Thursday.
The downward reaction continued Friday with the rate hovering around N1,185 to one dollar, an indication that the coming week may see further decline.
Analysts have opined that the Central Bank is likely to inject dollars into the market to strengthen the naira, a move that have become sacrosanct if the dollar must be tamed temporally following its impact on price of household commodities and industrial material.
It is generally believed or agreed that the current foreign exchange rate condition is market driven being hinged on the fact that foreign exchange inflow from crude into the country is lean following numerous obstacles militating against meeting our export quota. While this is true in itself, there are strong indications and insinuations that this situation is now exacerbated by artificial hording of the green back on the basis of speculation by the rich and influential. They are able to buy the dollar in large volume to create a scarcity and then resell when the rates increase as a result of the scarcity.
The Supreme Court judgement has affirmed the presidency of Bola Tinubu. It is certain that the slight ease of dollar against the naira is in response to the judgement. Now things have settled, what next will the government do to stabilize the market. It is obvious that the unification of the market has yielded not result.
If the government inject more dollar into the market from whatever source (borrowed), how will the super-rich speculators be tamed? What measures will CBN put in place to check dollar hording and other practices that creates scarcity of the currency.
On the long run, if the diversification of source of revenue to the nation is what this present administration will consider as a mandatory policy, how will the recent free access to foreign exchange granted to commodity importers be handled to encourage local manufacturing which is a prerequisite to the diversification success?
These questions and many others seek answers we await in the coming days.