In a dynamic market twist, the Nigerian Naira plummeted to as low as N910 against the dollar, later moderating to around N902/$. This slide followed a JP Morgan report revealing Nigeria’s net foreign exchange reserves at $3.7 billion, a stark signal of currency pressures.
The Peer-to-Peer (P2P) market came alive, with Nigerians turning to dollar-backed stablecoins like USDT for transactions and hedging. This tech-savvy approach enables smoother cross-border money transfers, overseas purchases, and efficient transactions, outpacing traditional banking methods.
Yet, this P2P market thrives in regulatory shadows, harbouring inherent risks.
JP Morgan cautioned that Nigeria’s FX market would remain under scrutiny due to the true value of its net FX reserves. A trade deficit and FX pressure persist, with reserves lower than anticipated due to extensive currency swaps and borrowing.
Short sellers maintained their stance against the naira, even as cash outside banks dipped from N2.26 trillion in June to N2.20 trillion in July.
The Central Bank of Nigeria (CBN) introduced a suite of measures to stabilize the naira and curb inflation. While initial rallies ensued, they were short-lived, as the naira subsequently weakened against the dollar.
The Nigerian National Petroleum Company (NNPC) secured a $3 billion emergency loan from Afreximbank to stabilize the FX market. Nonetheless, currency speculation soared, questioning the effectiveness of CBN’s efforts in ensuring market integrity.
CBN also unveiled initiatives to enhance the Bureau De Change Operations and NGX proposed dollar-denominated bonds listing, yet fundamental economic shifts remained elusive. Soaring inflation and fuel prices raised skepticism about the apex bank’s capacity to navigate the challenging landscape.
As the naira’s decline persisted post-FG/CBN’s Naira float announcement, it depreciated by nearly half against the US dollar in just 10 weeks.
Amid structural and budgetary challenges, economists questioned CBN’s efficacy with its limited FX resources in achieving price and exchange rate stability.
(Published by marketnewsng)