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BREAKING: Dollar To Naira Exchange Rate May Hit N1,000/$1 Soon – Traders

he exchange rate is unlikely to fall to N1000/$1 as that will suggest a 20% depreciation in just 8 weeks.

by Justice Winner
October 31, 2022
in Economy And Business, Headline
Nigeria's Foreign Portfolio Investments

Currency Traders have expressed concern that the dollar to naira exchange rate may hit N1,000/$1 soon.

 

Newsonline reports that the exchange rate between the naira and dollar on the black market is expected to hit N1000/$1 by the end of the year. This is according to black market operators who shared their views on their projection for the value of the naira on the back of the rapid depreciation that has ensued in the last few weeks.

 

This online news spoke to some operators who preferred not to be named in this story for fear of being victimized for airing their views. They mostly opine the daily pace of depreciation of the naira could likely lead to the much-feared N1000 to the dollar by the end of the year.

ALSO: Tinubu Campaign Council, Jandor Fight Dirty Over Lagos Governorship

 

Several media reports on Sunday suggest the exchange rate traded at about N800/$1 even though checks by Newsonlined suggest some black market operators still sold at between N775 and N790/41. The P2P market still traded at about N782.9 to the dollar on Sunday, October 30th.

Downward spiral – The exchange rate opened the year at about N565 to the dollar and depreciated to N615/$ by end of June or N50 depreciation in 6 months.

  • However, since July it has depreciated from N615 to about N775 or N165 weakening in just about 4 months.
  • According to Nairametrics records, the exchange rate crossed the N700 mark on the second of September and has declined rapidly since then. It ended September at about N735/$1.
  • If it ends October at N800, then the month will likely go down as one of the worst months of depreciation in history for the black market, considering that the currency is depreciating by a whopping NN65/$1.

Third quarter demand Pressure: The reason for the drastic fall in the exchange rate in the third quarter of the year are multi-fold but can be summarized into three areas.

  • The September fall is when most schools open abroad meaning thousands of Nigerians looking to exit the country for greener pastures need to change their naira to dollars. Most of them sell off their assets locally for tens of millions of naira and then convert the same to dollars before making their way out of the. country.
  • The other reason can be attributed to the need for Nigerian businesses to pay for imports of goods and services.
  • Capital repatriation in the form of dividend payments, sales, or debts is also mounting pressure on the back market as supply becomes harder to come by.

New Naira notes: The announcement of new naira notes by the central bank is also considered a major factor for the depreciation recorded during the week.

  • Information obtained from traders indicates they observed a spike in demand for dollars just after the announcement was made.
  • The prognosis is that some people who have stashed naira will likely exchange them for dollars to avoid falling under the radar of monetary authorities.
  • There are also cases of speculators who are rushing to take a position in anticipation of another fall of the naira against the dollar.

N1000/$1 by December? Most of the operators we spoke to opine the exchange rate could be doomed to N1000 to the dollar if the demand pressure does not subside.

  • “At the rate, we are going it is very likely the exchange rate will drop further and might get to N100 by December if more people buy than sell,” one trader remarked.
  • Another suggests the exchange rate could even get to N1000/$1 before Xmas due to the further demand pressure triggered by those who need it for their vacation abroad. “The number of Nigerians with family abroad is not much, so most of them will need to buy dollars so they can go and spend Xmas with their families abroad.”
  • The same sentiments were echoed by most of the traders we spoke to though a few disagreed explaining that Nigerians returning from abroad for the holiday might ease the pressure on the exchange rate in December.

Nairametrics research opines the exchange rate is unlikely to fall to N1000/$1 as that will suggest a 20% depreciation in just 8 weeks.

  • The exchange rate has so far depreciated by 28% since January and also, between July and October, it depreciated by 20%.
  • Therefore things will have to be very bad for the exchange rate to depreciate by a whopping 20% in 8 weeks. This will be unprecedented if it does happen.
  • Flashback to two months ago, when we did also fear the exchange rate could hit N1000 if the fiscal and monetary authorities don’t collaborate to salvage the situation.
  • We expect the central bank to ease dollar scarcity over the next few weeks as it reacts to current pressures from the stakeholders such as legislators, IMF, bond buyers and even the government.

Learn from history: The exchange rate opened in December 2021 at about N570/$1 but closed at N565/$1 by year-end.

  • But just like we are currently witnessing, the exchange rate went from N495 and the start of June 2021 and rose to about N575/$1 by October before it strengthened towards November and December 2021.
  • The exchange rate is highly volatile thus a surge in dollar sales by the central bank could strengthen the exchange rate in a blink.
  • Facts on the ground however suggest the economy is still struggling with attracting dollars just as oil sales fail to swell government coffers due to theft.

Next MPC – One eye will also be on the monetary policy committee meeting for November 2022 as anything Emefiele says there could affect the exchange rate again.

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Justice Winner

Justice Winner

Justice Winner is a Veteran Nigerian Journalist With Expertise in Writing Nigeria News, Entertainment and Politics. He has a degree in Journalism/Mass Communication Studies. Justice is a dedicated and talented writer committed to producing high-quality content that is authoritative, informative, entertaining, and engaging. Connect with Him on Instagram , Facebook, Twitter, and LinkedIn.

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