By Eizabeth Chukwuma
Currency speculators who over the last eight years have been accumulating the North American country of the United Stated States, US dollar, described as the 10th strongest currencies out of the 180 recognised worldwide to turn the Nigerian currency, naira as a worthless legal lender under President Bola Ahmed Tinunubu are in for a shocker. Forbes Advisor Australia had ranked the naira as the 96th in rank out of the 180 world recognised legal tenders.
Wale Edun, minister of Finance and Coordinating minister of the economy and Olayemi Michael Cardoso, a one -time Head of Citi bank in Nigeria and now governor of Central Bank of Nigeria, CBN, appears to have taken advantage of the free hand given to them and other political appointees by the Nigerian President to operate and deliver on their mandate to pull the rug under the foot of the currency speculators who over the years have been dictating the value of the naira at the parallel, popular, black mark foreign exchange rate and which in turn affects the official and Import and Export Window exchange rates.
There is no gain saying the fact that most currencies used in the global economy are’’ floating’’, meaning their valuates depends on the demand on supply at the foreign exchange market while some other currencies are pegged, meaning that their value relative to another currency , particular, the US. Dollar is fixed at agreed rate.
At present, the Nigeran government operates both the official and the Autonomous foreign exchange market which had informed while the naira exchange rate over the last six months had remained unstable. The exchange rates, according to financial analysts affect the cost of goods and services puchased in foreign currency. This may have informed why at any time the naira weakens against the US dollar , prices of goods and services goes up within the country.
A currency dealer at Apapa, one of the major trading hubs in Lagos, the nation’s Commercial nerve centre who spoke to The value news on Saturday, November 4, 2023, disclosed that the business is scaling down as their forex suppliers are not currently meeting up their daily demands. Many of the currency speculators, more than ever before it was learnt, face the risk of losing their funds which they have hoarded over the years as the Cardoso led CBN has risen up to the challenge.
The value News online Magazine was informed that the total inflows of the US dollar, which is the most traded foreign exchange in global market declined by over six percent to $1.23 billion in October after it had pivoted from a three-month high of $1.31 billion the previous months.
Phoenix had reported that foreign exchange inflows from foreign investors in the month of September 2023, had declined to $1.07 billion . It was said to have declined further in this month of November, which the currency speculators may not have found funny.
Indeed, the free hand given to the duo, Edun, the minister of Finance and Coordinating minster of the economy and Cardoso, the apex bank governor, may have given duo the courage to initiate bold economic initiatives of ‘’deliberate action plans’’ that would shore up the naira in the coming months to the surprise of the speculators who had thought that the Nigerian government would not be able to effectively fund the official foreign exchange market to give room to those that source for forex urgently to patronise the black market and thus push up the exchange rate .
The CBN, under the Leadership of Cardoso, may have sent a message to the speculators ‘’ to be careful in their accumulation of forex’’’’ to standardise the naira as the bank has the capacity and strategy to sustain the naira’s recovery rate at the official and parallel market foreign exchange markets’’.
The apex bank may have confirmed its stand to fund the forex market with the payment of the outstanding $6.7 billion overdue forward foreign exchange contracts that had matured as it settles Citibank, Stanbic IBTC and Standard Chartered Bank , described as the biggest players in the Forex business and other creditors.
The payments of the outstanding forex to the creditorsmay have shored up the value of the naira in the recent time to the surprise of the speculators . This is evident as most traders were said to have quoted N950.00 to one US dollar for buying and N1050 for selling between Friday, November 3, 2023 and Sunday, November 5, 2023.
Aminu GwadAbe, President, Association of Bureau De Change Operators of Nigeria, ABCON, had said that the CBN, could keep the naira stable for now because ‘’ it was not only boosting the US dollar liquidity in the country’s official foreign exchange market but also mopping up cash through interest rates hike’’
The ABCON President had said that the move by the CBN to stabilise the naira became more pronounced as dealers at the Investors and Exporters, I&E, window , official forex market to the naira on Friday, November 5, 2023, had traded at N776.14 to one US . dollar with $99 million transaction volume. Gwadebe , the ABCON , President was emphatic that the appreciation of the naira at the official and parallel foreign exchange markets ‘’stems from ‘’the double edged sword dollar liquidity injection into the economy and the mopping of the naira through interest rate hikes’’.
He had said that the major problem the speculators are facing currently at the Autonomous Foreign Exchange Market, was that they are ‘’more interested in the elements of sustainability of the feat already achieved in the market dictating the value of the naira that forex market to remain in the business and thus have resorted to panic selling as against panic buying to remain in the business.
The CBN Authorities deliberate action plans to stabilise the naira may have forced the speculators to go back to the drawing board to still dictate the value of the local currency at the forex market. On Monday, November 6, 2023, the naira , was said to have depreciated across all segments of the forex market as it settled for N1000.00 to US $1 in the major trading hubs in Lagos metropolis.
While Speculators are still struggling to control the value of the US $1 to the naira at the parallel foreign market to remain relevant, Lekan Adewoye , Chairman of the Basic Metal, Iron and Steel Products Sector of the Manufacturers Association of Nigeria, MAN, had said that with the continued rise and fall of the value of the naira at the official foreign exchange market and, the I&E window market, including the parallel forex market , the manufacturers are not being encouraged.
He noted that the inability of the products manufacturers to assess the the official or the I&E window forex market had put many of them at disadvantage with their competitors in other West African countries like Ghana, Coted’Ivore and Togo .
He had said that lack of consultation on major critical issues and decisions on forex by the CBN, Leadership and government policy somersault had forced some members of the Association who had invested in backward integration to regret the move because everyone who can assess the Forex market and will claim to be an importer, thus forcing the sincere manufacturers to close shop .
In spite of the fact, the US dollar, is the world’s most traded currency, Forbes Advisor, Australia had reported that that the greenback , is not the strongest of the 180 -odd traditional fiat currencies recognised as legal tender worldwide. Although, the US, is the world biggest economy, but going by Forbes report has not automatically translated to the country’s currency value on the global stage.
Forbes has ranked the US dollar as the 10th strongest currency in the world held by many banks and the currency used to price many commodities, including Crude oil in the international oil market , gold and copper.
Forbes Advisor, Australia, had reported that Kuwaiti, a country between Saudi Arabia and Iraq , dinar, KWD, introduced in the 1960s , which was said to have been initially pegged to the British pound sterling and before being pegged to an undisclosed basket of currencies including the US dollar at $3.24 US ,dollars or, put in another way, US$1 equals 0.31 Kuwaiti dinars I for now is the strongest currency in the world.
It had reported that Bahraini dinar is the second strongest currency in the world with I Bahrani dinar exchanging at 2.65 US dollars at the country’s foreign exchange market. Bahrain is an Island and nation in the Persian Gulf Coast of Saudi Arabia and earns most of its revenue from oil exports like Kuwait. It had entered into circulation in 1965 and pegged to the US dollars.
Going by the Forbes Adviror, Australian report, the Omani, a country between the United Arab Emirate , UAE, and Yemen at the tip of the Arabian penusula, rial, OMR, is the third strongest currency in the world , exchanging 2.60 US dollars to 0.88 Omani rial. It was said to be quickly followed by the Jordanian dinar , another Middle East country as the fourth strongest currency in the world. At present at the country ‘s Foreign exchange market, 0.71 Jordanian rial equals US $1.41.
Jordan, which is a Landlocked country in the Middle East may not be as lucky as Kuwait, Omani which depends on export of oil and gas to earn its forex revenue but has struggled with its sluggish economic growth and rising foreign debts as its currency which had entered into circulation in 1950, is pegged to the US dollar.
Forbes may have surprised many when it reported that that British pound sterling is the fifth strongest currency in the world, stating that 1 British pound exchanges for US $1.28 . The British pound sterling which was said to have been introduced into the British economy in 1400s before being decimalised in1971, going by the Forbes report appears to be free-floating and thus not pegged to other currencies. Glibratar, located at the southern tip of Spain, pound, according to Forbes Advisor, is the joint fifth strongest currency in the world with 1 Gilbratar pound buying US1.28 at the country’s forex mrket .
Going by the Forbes Advisor’s reports, the Cayman Islands dollar, KYD, is the sixth strongest dollar in the world as 1 Cayman Islands dollar exchanges for US 1.20 at the country’s foreign exchange market. Described as an offshore financial centre, Cayman Islands is a British territory in the Caribbean, the value news findings shows .
The Seiss Franc , CHF, which is the official legal tender of Switzerland and Liechtenstein, Forbes Advisor, had reported is the seventh strongest currency in the world which exchanges for 1 Swiss franc to US1.15.The Euro, EUR, which is the official currency of the European Union, EU, comprising 20 out of the 27 countries that form part of the Union , Forbes had reported is the eighth strongest currency in the world, which was said to have entered the market in 2002 and currently- free floating . There is no gain sayong the fact that value of one U dollar to other world recognised legal tenders may have had appreciable impact to the value of the naira at the country’s official and parallel foreign exchange markets. This is where tthe duo , Edun, the minister of Finance and Coordinating minister of the economy and Cardoso, the CBN , governor have to work closely with the Middle East countries which currencies have been ranked by Forbes Advisor , Australia as the strongest in the world to know how the various monetary and fiscal policies put in place to strength their respective countries currencies against other world recognised currencies, particular, the US , ollar.
