Keep hearing about Dollar to Naira Exchange Rate? Should you be worried about the disruption of Nigeria's naira devalues
to 254 against the dollar as it floats for the first time? That's a drop of 22%.
But in reality, the naira appreciates by 29% from N360 to a dollar at parallel market (i.e. black market, an unofficial market in goods or currencies, especially in a country with a controlled economy) to N254. Naira floats for the 1st time.
That is, if you take the interbank market as your market! There is a BIG doubt the parallel market will go away.
If all legitimate buyers have access to interbank market, patronage for parallel market will reduce and Limited to illegitimate transactions. The illegitimate buyers can pay the premium at the parallel market. Sure they won't mind or would they?
There is a good reason to say... it's not a devaluation. A market-driven rate downwards is a depreciation.
Nonetheless, it is pretty much what the market was looking for. It is a positive move over the long term Nigeria's naira currency.
How will this impact value of Naira in the parallel market?
The dollar to naira exchange rate or as people are asking... Why Nigeria's naira devaluation hasn't come a day long is
essentially is allowing the currency to float will help economic recovery, but its no panacea to good economic policy.
In general, Nigeria's Naira is still better officially less 22% than parallel market at over 50% with loads of corruption.
Also, we're seeing Nigeria's naira falls to N282.5 (30% down) vs $dollar, after the central bank of Nigeria (CBN) sells $4bn into the market. Nigeria's Naira weakens or slide deepens as currency value plummets to record low as peg is dropped.
Many people are incredibly nervous of selling dollars as they're worried about selling at the wrong rate. A lots of people are waiting on the central bank to see what it will do next.
Wait and see policy, until the currency stabilizes, banks will be wary of selling dollars in case the exchange rate drops soon afterward and they make a loss.
Some traders are betting the naira will further depreciate more than 10 percent in three months.
Three-month naira non-deliverable forward contracts rose 1.6 percent to N325 against the $dollar, a record on a closing basis, while one-year contracts climbed 1.4 percent to N359.
Now that Nigeria's naira is a floating exchange rate, foreign investors can have more confidence in the country and Nigeria should see an uptick in the foreign investments it so desperately needs.