Business
Why Naira exchange rate dropped to its lowest level in weeks – Traders
The Naira had remained stable in the last two weeks, on the backdrop of reduced demand for FX at the black market during the Christmas and New Year festivities. However, the exchange rate has resumed its downturn, trading at its lowest level in almost three weeks.
The value of the naira depreciated against the US dollar, closing at N745/$1 compared to the N730/$1, which it closed in the previous week on Monday.
The downturn in the market has been attributed to the resurgent surge in FX demand, following the resumption of foreign schools and business activities in the country.
In a phone conversation with Audu, an FX trader at the Lagos International Airport, he said the surge was expected considering the time of the year when parents want to send dollars to their children schooling abroad.
“This time of the year, it is normal for the exchange rate to depreciate because some parents who want to send money to their children in foreign schools will buy dollars, as well as some Nigerians who want to pay their school fees in dollars will also be in need of FX.”
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In the same vein, Mr. Muritala who sells dollars at Allen Avenue explained that the demand has gone up as expected, as it is the beginning of the year, leading to the recent changes in the exchange rate.
The massive decline in FX turnover at the official market leaves a supply gap for Nigerians’ FX growing demand, which leaves them with limited options but to patronize the black market.
Recall that several Nigerians traveled abroad in recent years, most of whom were able to migrate through the education route, and would need to fund their school fees.
Some of these students are still being funded by their guardians or parents here in Nigeria, who would require changing their local currency into US dollar, hence higher demand
Responding to the outlook of the naira at the black market, the traded expressed uncertainties concerning the direction of the currency going forward. They explained that the exchange rate is determined by the level of demand and supply, and cannot be projected as there are other fundamentals that need to be considered.
Meanwhile, the exchange rate at the cryptocurrency peer-to-peer market has also depreciated to a minimum of N745.6/$1 compared to an average of N739/$1 recorded in the last week of December.