The naira has plummeted to N1,745 against the dollar in the parallel market.
This marks a sharp reversal from the sub-N1,600 levels recorded just last week.
Foreign exchange traders and analysts describe the situation as a major setback for the local currency, which had recently shown signs of recovery.
Reports from Nairametrics reveal that the naira traded at around N1,685/$1 earlier in the week before plunging further.
As of 10 a.m. on Wednesday, December 11, the parallel market saw rates surging past the N1,700/$1 mark.
Market experts have termed the recent recovery a “dead cat bounce,” a term for temporary gains that precede further losses.
One Bureau De Change (BDC) operator attributed the decline to speculators’ resistance to the naira’s appreciation.
“The dollar supply that was driving the naira’s recovery has dried up,” the trader told reporters.
He added, “Speculators are fighting back to cover their losses, and that’s why we’re seeing this sharp depreciation.”
On Monday, December 9, the naira closed at N1,640/$1, losing N70 compared to its Friday value of N1,570/$1.
This 4.5% decline ended a four-day streak of appreciation following the Central Bank of Nigeria’s (CBN) introduction of the Enhanced Foreign Exchange Market System (EFEMS).
The EFEMS Platform: A Double-Edged Sword?
The EFEMS platform was hailed as a game-changer for Nigeria’s forex market.
Launched by the CBN, it consolidates all foreign exchange transactions into a single transparent market.
Under EFEMS, all transactions must be priced through the system, replacing the old multiple-window approach.
In its first five days, EFEMS appeared to strengthen the naira, boosting investor confidence and reducing speculative trading.
However, recent developments suggest that speculators are pushing back.
Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), had warned of this resistance.
“Speculators will try to claw back their losses,” Gwadebe said earlier.
He urged the CBN to maintain its momentum and discourage illegal currency speculation.
Parallel Market Woes Deepen
While EFEMS has introduced greater transparency in the official forex market, the parallel market tells a different story.
The gap between the official exchange rate and the black market rate widened dramatically this week.
On Monday, December 9, the naira traded at N1,538.5/$1 in the official market.
This represented a slight decline from Friday’s rate of N1,535/$1.
However, the parallel market rate of N1,640/$1 widened the gap to N101.5—a stark contrast to last week’s N35 gap.
Traders and Experts Sound the Alarm
The forex market remains volatile, with traders warning of further uncertainty.
BDC operators report weak demand for the dollar but also a significant reduction in supply.
“The market is dull, demand is weak, and supply is tight,” one trader observed.
Analysts say this imbalance could persist unless the CBN takes stronger measures.
Gwadebe has called for closer engagement with BDC operators to address volatility in the market.
“The CBN must keep the pressure on speculators and ensure the naira’s recovery is sustainable,” he said.
Economic Implications of the Naira’s Fall
The naira’s sharp depreciation has raised concerns about inflation and purchasing power.
Businesses that rely on imported goods are already feeling the pinch of higher exchange rates.
Experts warn that if the trend continues, it could erode consumer confidence and destabilise the economy further.
For many Nigerians, the fluctuating naira has become a daily source of anxiety.
“I can’t plan my finances when the dollar rate changes every day,” lamented a Lagos-based entrepreneur.”
