By Ndubuisi Ekekwe
History was made yesterday in Nigeria: “In a surprising turn of events on Tuesday, the foreign exchange market experienced an unusual occurrence as the naira reached N1,482/$1 on the Nigerian Autonomous Foreign Exchange Market (NAFEM). This marked a significant increase compared to the parallel market rate, which remained anchored at N1,460/$1, maintaining the rate from the previous day.”
Yes, the official rate rose above the black market rate. So, if the official rate is ahead of the black market, we can all agree that some asymmetric endogenous factors are deeply at play here. Simply, the official demand was so high that the supply side crashed, moving price to a new equilibrium point in the supply-demand curve of Naira/USD. I think a state of emergency is due right now to save Naira.
(I suspect that Dangote Refinery is mopping all available USD to import crude oil since it cannot rely on Nigeria now, creating more pressure on the Naira.)
Good People, it may be time for the president to address the nation on what is going on because basic economics does not work in Nigeria anymore. As that happens, I commend the central bank for the new policy on foreign currency exposure by banks. That call is necessary because USD, Euro and GBP are making banks have great parties, even as those same currencies could destroy them if there is a flip. So, making sure they stay within 20% of net open position (NOP) is a nice call by the apex bank.