By AYOOLA OLAOLUWA
Foreign exchange dealers operating in the country have continued to count their losses as the nation’s currency, the Naira, continued its winning streak against other international currencies.
The naira continued its daily gain against the dollar on Friday, August 18, to sustain a weekly appreciation of around 15 per cent against the American currency in the parallel market.
At the end of trading on Friday, the naira exchanged for N820/$ in Lagos and the Federal Capital Territory (FCT), thereby throwing many traders, who had bought the greenbacks at a much higher rate into confusion.
Traders at major market markets like Broad Street on Lagos Island, Airport Hotel on Obafemi Awolowo Way, Ikeja and Allen Avenue, all in Lagos; Wapa in Kano State; Dugbe and Bodija in Oyo State and Zone 4 Wuse in the Federal Capital Territory (FCT), Abuja, sources revealed, were seen dumping dollars on Saturday as fear of a further slide in the value of the greenback gripped currency traders.
Most currency dealers, it was learnt, lost between N80 to N120 on each dollar due to the unexpected appreciation of the naira during the course of the week.
A visibly agitated trader at the popular Allen Roundabout, Ikeja, Lagos currency market, who spoke on the situation at the weekend, disclosed that traders had lost several millions in the last one week to naira appreciation.
According to him, many of his colleagues, including himself, have started offloading their dollar, Pounds Sterling and Euro hoardings out of fear that naira will continue its path to recovery.
“We (currency traders) are in real trouble. Many of us bought dollars earlier in the week (last week) at the rate of N920 and sold for between N935 and N940 in the early hours of Monday, August 14.
“Unfortunately, the CBN and NNPC announced the same day they would be intervening in the FX market to shore up the value of the naira.
“Since the announcement was made, dollar has been losing to the naira. Though, a U.S dollar was exchanged for between N820 and N840 on Friday, our financial advisers advised us to quickly dump the dollar in our possession, warning that the naira could appreciate to around N700 per dollar in the new week.
“We fervently pray that their projections will not come to pass as we are going to sustain huge losses if the trend continued”, the trader noted.
Another dealer, who spoke on the development, Hussein Baba, lamented that he is currently in a dilemma on what to do with his dollar collections.
“I am still in possession of substantial part of what I bought at an average of N920 per dollar last week.
“But as we speak, there is no fixed rate. Traders now sell at the slightest hint of trouble as they are not sure what the rate would be tomorrow.
“And the speed at which hard currencies are falling against the naira is alarming . This is what is causing panic, particularly the news that the NNPC had secured a $3billion loan to protect the naira”, the forex trader lamented.
Meanwhile, in spite of the panic created by the continued appreciation of the naira against other foreign currencies, some financial experts are dismissing the reactions as emotion-driven.
According to them, the continued uptrend of the naira is against all market fundamentals.
“The supply of dollars is still very low. This is evidenced by the low trading volume, which is around $120million.
“Yes, the naira will start appreciating as soon as the $3billion Afrexim Bank loan hits the market. We also heard that the government plans to pay for refined petroleum products using condensate as barter, instead of burning about 40 percent of her forex reserve on fuel importation.
“All these measures will in the long run have positive impact on the naira. But for now, the measures are inadequate and not yet in place.
“What we saw last week was just market reaction, not reality”, a forex expert, Femi Olubiyo told our correspondent.
The acting Governor of the Central Bank of Nigeria (CBN), Folasodun Sonubi, had on August 14, disclosed that the bank was set to take new measures to stabilise the naira against the dollar.
The CBN boss, who made the disclosure to State House Correspondents after briefing President Bola Tinubu on what the bank was doing to halt the slide of the naira, said President Tinubu expressed his concern about the impact of recent developments in the foreign exchange market, particularly on ordinary citizens.
Sonubi said he assured the President that the CBN is actively working to improve liquidity and stability in the market, including addressing issues in the parallel market.
He stressed that the fluctuations in the parallel market are not solely driven by economic factors, but also by speculative demand.
The apex bank governor said while he would not disclose specific details, he warned speculators that the CBN’s upcoming initiatives could potentially lead to significant losses for them.
He said the primary purpose of his presence at the presidential villa was to reassure the President that the CBN is taking decisive action to address the concerns raised.
He expressed confidence that the measures being implemented would yield positive outcomes within a few days.
“Mr President is very concerned about some of the goings on in the foreign exchange market. One of the things we discussed is what could be done to stabilise and what could be done to improve the liquidity in the market and also the goings on in the various other markets, including the parallel market.
“He’s concerned about its impact on the average person, since, unfortunately, a lot of activities that we do, which are purely local, are still referenced to exchange rates in the parallel market.
“We’ve discussed and I’ve shared with him what we’re doing to improve supply. If you look at the official market, you’ll find that that market has been fairly stable and the spreads of the difference have not fluctuated as much.
“We do not believe that the changes going on in the parallel market are driven by pure economic demand and supply, but are touched by speculative demand from people.
“Some of the plans and strategies, which I’m not at liberty to share with you, means sooner rather than later, the speculators should be careful because we believe the things we’re doing, when they come to fruition, may result in significant losses to them.
“But my presence here is more about the concerns the President has and his needs to know that we are doing something about it, assurances of which I have given him totally.
“So I hope this helps. We are looking at it and we’re doing things that will significantly impact the market in a few days time and we will all see it.
“The intention is to ensure the environment operates at a level that’s more efficient, but also that is also very reasonable and does not have a negative impact to the best that we can on the lives of the average person”, the acting CBN governor had noted.
Barely two days later on August 16, the Nigerian National Petroleum Corporation (NNPC) Limited announced that it had secured a $3 billion emergency crude repayment loan from the African Export-Import Bank (Afreximbank) to support the naira and stabilise the foreign exchange market.
While the details are still sketchy, NNPC is expected to repay the loan with crude oil at an interest rate between eight and 11 percent.
“The NNPC Ltd. and Afrexim Bank have jointly signed a commitment letter and Termsheet for an emergency $3 billion crude oil repayment loan.
“The signing, which took place today (Wednesday, August 16) at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Ltd. to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market”, NNPC explained in the statement.
The new loan, government sources informed, is to enable NNPCL defray taxes and royalties in advance and provide the federal government with dollar liquidity to stabilise the naira via incremental releases based on the federal government’s needs.
