Despite efforts by Nigeria’s central bank to inject liquidity into the official market and clear significant foreign exchange backlogs, the value of the naira witnessed a notable erosion in both the P2P (peer-to-peer) market and the physical black market on Tuesday.
In the P2P market, a segment popular among crypto traders, retail investors, and speculators, the naira traded at approximately N1230/$ early on Tuesday, marking an increase from the previous day’s rate of N1220/$. Simultaneously, the physical black market reported an average exchange rate of about N1,245 to a dollar.
The divergence between the naira’s official and black market rates persists, despite the central bank’s efforts to clear outstanding foreign currency amounts tied to forward deals. The apex bank recently disclosed settling around $2 billion in outstanding foreign exchange forwards over the past three months to address the backlog of dollars. However, traders in the unofficial market seem largely unaffected by this development.
On a positive note, the naira posted gains against the US dollar in the official foreign exchange market on Monday. Closing at N856.57 per dollar, it strengthened by 1.45% compared to the previous close of N869.13 per dollar on Friday.
Internationally, the US dollar index, indicating the strength of major currencies, maintained its range, with investors closely watching for key inflation data that could offer insights into the US Federal Reserve’s monetary policy direction for the year.
Currency speculators continue to influence the global stage, driven by mixed sentiments. Geopolitical tensions in the Middle East, illustrated by the Red Sea situation and the discovery of Chinese weapons in Hamas storage facilities by Israel, contribute to the favoring of the US dollar. However, the collapse of the ISM data last Friday has led some speculators to anticipate a swift interest rate cut by the Federal Reserve, adding complexity to the market dynamics.