“Fellow Nigerians, I wish to thank you for the support and encouragement you have given me so far. It has been unprecedented. As at this evening, the Dollar has dropped further to N310 as against N390 on Sunday evening before my interview on Channels. This shows that the earlier increase has been artificial as some people were manipulating and benefitting from it. They will all be fished out in due course so that Nigeria will be better and the suffering of the masses will end. With God and our sincere efforts, even when we have not been fully consulted, the Dollar can still be brought down to N200 and below. Let the discourse continue. Shun the Dollar till it’s N200. Pray for Nigeria and let the Dollar go down to N200 and below.” – Patrick Ifeanyi Ubah, Tuesday, 23/02/3016
The above statement was credited to the Chairman of Capital Oil and Gas Services Ltd. and the Publisher of The AUTHORITY newspapers, Dr. Patrick Ifeanyi Ubah, who boasted that if the Federal Government consults him, he could restore the nation’s currency to an exchange rate of N200 to one US Dollar within one month – thereby arresting the slide in the Naira which is virtually crippling the economy.
48 hours after the statement there is confusion in town over the exchange rate of the dollar to the Nigerian currency as Bureau De Change (BDC) operators said Wednesday Naira now exchanged at N305/dollar.
Ellombah,com quoting sources in the foreign exchange market stated that the Nigerian currency, up from its steady rise within 48hours, has risen steadily against the dollar in the wake of President Muhammadu Buhari’s insistence that he does not support the devaluation of the currency.
Chief Ubah, who was speaking on a Channels Television politics programme, on a day the Naira was exchanging at N385 to the US dollar, did not say how he was going to bring the Naira down to an exchange rate of 200 per dollar – but said the government could seize everything he owns if he failed to do this within one month, if given the mandate. He advised the Federal Government to consult some Nigerians who can halt the free fall of the Naira which is affecting the nation’s economy, and on Tuesday staked his N500 billion assets on his proposal to the Federal Government to stem the free fall of the Naira against the Dollar.
Speculators had been shocked by the consecutive rise on Tuesday as they had predicted an all-time rise from the initial N400 (an all time low) to about 450/500 in the coming days.
NAIRA DOLLAR POUND EURO
(NGN) (USD) (GBP) (EUR)
BUY / SELL BUY / SELL BUY / SELL
24/02/16 280 / 290*** eve 400 / 405*** eve 342 / 350*** eve
24/02/16 300 / 310* midday 440 / 445* midday 342 / 350* midday
24/02/16 300 / 310* morning 400 / 407* morning 315 / 320* morning
23/02/16 360 / 365 495 / 500 360 / 365
22/02/16 367 / 372 496 / 505 390 / 395
19/02/16 367 / 370 493 / 498 367 / 370
There are further speculations that the amount, up from an initial N364 from Tuesday, is now at N305, while there are also unconfirmed reports that it may slip further before the end of the day.
Forex experts however told Elombah.com that what Nigeria is going through is a Market panic and has nothing to do with Mr Ubah’s declaration or Mr Buhari’s statement.
According to a Forex exchange agency, “The price correction seen in the market in the last three days is not because the naira has appreciated. The naira has only stabilised and the three key currencies slumped. There has been Market News about the Pound Sterling. Euro and some Dollar wobbles.
He asked: “why the Naira panic when below factors persists”:
1. Naira has not gained. The crude oil we export has not appreciated in price rather, it has stayed within a range to sustain steady revenue and maintain CBNs weekly dollar supply.
2. Naira Non-Devaluation; As President Buhari reiterated he would not devalue the Naira, those who had bought and held on to the dollar and other FX currencies to make quick returns in the event of a devaluation, have off loaded their funds in the market causing over supply. This has led to the next bullet point – Speculators panic.
3. Speculators panic – The speculators, who have contributed to increased demand for forex, have panicked based on President Buhari’s announcement and other global market news. Not sure how long to hold on for or even if it’s worth holding on to the accumulated forex, have panicked and started off loading their funds as fast as possible especially before the CBN intervention fund hits the market this Thursday causing additional supply. This is influenced by the next bullet point – Brexit panic.
4. Brexit Panic – The news that Britain could leave the EU has caused global panic causing the Pound and the Euro to slump heavily. This panic has translated to the Nigerian market with speculators and holders of the currencies offloading as fast as possible. Expect this scenario in June 2016 when Britain holds a referendum on Brexit. This is driving the next bullet point –BDC and Black Market Panic
5. BDC and Black Market Panic – The BDC operators and Black Market traders are now in a panic state that they are refusing to trade the FX. Those that are willing to buy are using a “Margin of Safety” by asking to buy at a very low rate (as low as N220 to $1) and offering to sell at a much higher rate of $310 to $1. This is influenced by the next bullet point – CBN Intervention Fund.
6. CBN Intervention Fund – The CBN Intervention fund is coming in this Thursday. The CBN rate on abokiFX website shows a steady decline. This means CBN will supply dollars to banks at this lower rate tomorrow compared to the market. As no further speculation in the market, total market demand falls, leading to oversupply and price correction. This has created the position in the next bullet point – Market Equilibrium reached
7. Market Equilibrium reached – The importers demanding naira have reduced as the market reaches an equilibrium of demand and supply. Without the further speculation, the prices are gradually correcting themselves. This helps to understand the correction in the next bullet point – Low Crude Oil
8. Low Crude Oil – Crude oil prices are still hovering around $30 – $35 dollars which means the Naira is able to stabilise on this prices rather than appreciate. This means the Excess Crude account will be stabilised to ensure CBN can still supply some Naira without depleting its reserves but CBN cannot increase its supply to meet market demand at this stage. This leads us to our concludion in the next bullet point – Conclusion
The Exchange Agency concluded: “As the noise settles, expect demand for FX to gradually increase and gradually drive up rates again though not to the speculative levels we have recently witnessed.”