The country’s currency’s dizzying speed of devaluation and regaining lost ground has left many experts flummoxed, with many predictions wide off the mark.

Goldman Sachs’s crystal ball gaze on where the naira will be when engaging with the United States dollars this year put the value at ₦1,200. Even the man under whose watch the naira was twice devalued in less than one year in office, Yemi Cardoso, Central Bank of Nigeria governor, refused to pitch his tent on a definite exchange rate, only saying the currency was undervalued. 

Then there were Nigerians, who had the means to speculate on the currency, who felt the sheer lack of direction in the first few months of the current administration would push the naira to levels never seen before. At ₦1,900 to the dollar, there was a rush to mop up dollars and keep it until such a time the economy spirals out of control and they then make a windfall.

Yesterday, the naira continued regaining lost value, opening the week at ₦1,130/$ in the black market, and ₦1,147.70 at the official market. 

Since virtually everyone focused on the movement of the currency has missed by a wide margin, will it be surprising if the naira continues to rally, to perhaps ₦500/$ before the end of the year?

An economist at Goldman Sachs, Andrew Matheny, in an interview with Bloomberg, believes there is the possibility of the naira surpassing their initial projection and trading even lower against the dollar. This probably can run further; we would see an extension of the move to ₦1,000 and maybe even sub-₦1,000. Since Goldman’s February forecast, six weeks have gone by and they’re continuing to hold the line, so that’s encouraging.

A raft of reforms by the CBN has seen the opacity of the FOREX market give way to transparency, thereby eliminating practices such as arbitrage between the official and black markets.

The apex bank has also been strong in regulating the banks, which are believed to be the biggest speculators in the FOREX market. The recent regulation regarding foreign currencies as collaterals for loans denominated in naira is seen as unlocking even more dollars stashed in banks. 

Part of the reforms also included the elimination of multiple exchange rates, which were used especially by government officials and their cronies to get dollars at lower rates and thereafter sell at black market rates.

Another was lifting the ban earlier placed on 42 items from accessing FOREX at official rates; demand for FOREX by importers of the 42 items was reported to have placed undue pressure on the unofficial exchange rate. 

ALSO READ: Nigeria’s inflation still monstrous

Confidence is gradually returning to the market but slower in the macroeconomy. Prices of goods and diesel are still relatively high, staying at the ₦1,900/$ exchange rate pricing, and have not shown any sign that the recent gains by the naira will have any impact in moderating prices soon. 

With Bureau De Change Operators requesting the CBN to lower the rate at which it sells dollars to its members, which invariably helps to modulate the exchange rate in the unofficial market, it appears the naira is set to continue its rally.

Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria is leading his members in the plea for a lower exchange rate as the market is surplus with dollars. If the naira sustains the rate it is regaining its lost value, who can bet against ₦500/$?

Adewole Ojo

Adewole Ojo is the Editor-in-Chief of Meiza Nigeria. He can be reached on adewole.ojo@fourpoints.ng.