Naira has been experiencing terrible mood swings these past few weeks. One moment everyone’s calling for Meffy’s head, and some people are clapping for him the next moment. Still, no one is quite sure what mood the naira will be in by December. Like everything else this present administration has touched, naira has been through a lot.
Even the wisest of us have been humbled as the stubborn naira simply doesn’t respond to decrees — regardless of if they come from God’s spokesman.
Let’s take you through naira’s latest journey.
The fall of the naira
We told you about how the governor of the Central Bank of Nigeria (CBN) , Godwin Emefiele, whom we all know as Meffy intends on redesigning some of the naira notes which triggered a severe response from the market. Basically, naira fell.
The CBN tried to stop naira from reaching the ground by going after bureau de change (BDC) operators, accusing them of speculating against the naira and creating a dollar scarcity. At the time, the naira was trading at about ₦816 to a dollar.
Despite this move, the naira refused to rise. Remember what we told you earlier about the naira being stubborn? It doesn’t respond too kindly to threats.
In fact, it got worse and traded at ₦872 to the dollar on November 7.
The naira strikes back
As the saying goes, all good things come to an end. But so too, do bad things. The naira finally got tired of the disrespect and said “enough”. From heading to relegation, the naira began its march towards redemption.
By the next day, November 8, the naira gained on the dollar, from ₦872 to ₦850. Over the following days it kept appreciating rapidly and by yesterday, November 13, it was trading at ₦671 to the dollar.
At the moment, the naira appears to be winning and we know Meffy is literally smiling to the bank now.
But the big questions are why did this happen? And how long will this surge continue?
Why is the naira surging?
So far, the CBN hasn’t explained to the public why the naira is performing well. And a lot of inside sources appear to be hush-hush on the matter.
According to Nairametrics, the naira’s recent rise is because there is a reduced demand for dollars. Several BDC operators they spoke to said that an initial rise of the naira made some people careful about buying more dollars.
Another reason they gave was that the CBN may have injected some dollars into the foreign exchange (forex) market which has cooled off demand. There are no public records of this however. If this is true, it would explain why the naira is bouncing about like a big man.
How long can we expect the naira to appreciate?
No one can confidently say. Remember that all good things come to an end. Nigeria gets most of its dollars from the sale of crude oil. So, an improvement in oil earnings could, in theory, sustain the naira’s exchange rate.
Also, the festive season is approaching so if more IJGB people return, there might be a few more dollars to go around.
But keep in mind that this is Nigeria. Anything can change in the twinkling of an eye. Don’t say we didn’t tell you.