The naira jumped in Nigeria’s parallel market on Wednesday as local traders responded to a warning from the central bank against currency speculation.
(Bloomberg) — The naira jumped in Nigeria’s parallel market on Wednesday as local traders responded to a warning from the central bank against currency speculation.
The naira’s unofficial rate was 810, representing a 15% increase in the Nigerian currency from Monday’s level of 950, according to Abubakar Mohammed, chief executive of Forward Marketing Bureau de Change Ltd. in Lagos.
On Monday, acting central bank Governor Folashodun Shonubi warned foreign currency hawkers to stop betting against the naira, saying that they will deploy new measures to strengthen the currency.
“Those who stored the dollar are bringing it out,” said Umar Salisu, a foreign-exchange operator. “Demand is not like before.”
Read: Naira Loses Key Support After Nigeria FX Reserve Revelations
The gap between the naira’s unofficial and official rate has narrowed to 4%, compared with about 20% last week.
The Nigerian currency has plunging since the regulator allowed it to trade more freely in June. In recent weeks, the central bank has also been unable to increase supply significantly through its interventions in the official window where the currency is traded, driving demand to an unauthorized market.
The volatility in the parallel market is likely to continue for the rest of the year, said Michael Famoroti, economist at Stears in Lagos. “I expect more knee-jerk reactions as the market receives good and bad news,” he said.
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