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Tinubu’s victory: Naira rebounds at parallel market

The victory of Senator Bola Ahmed Tinubu of the All Progressives Congress (APC) in the recent presidential election has had a positive impact on Nigeria's currency. The naira made a massive gain against the dollar at the parallel market, trading at N745/$ from N755/$, where it closed last week. This rebound is contrary to analysts' predictions of further currency depreciation over the next 12 months.

One of the factors contributing to the strengthening of the naira is the ongoing cash shortage caused by the Central Bank of Nigeria's (CBN) currency reform program, which involves swapping old naira notes for new ones. The reduced currency in circulation has had a positive impact on the naira, reducing demand for foreign exchange on the unofficial market.

Ikenga Kalu, a forex trader at AZA Finance, explained that as the redesigned notes begin to circulate in higher volume, there will be a resurgence in forex demand, and the naira will gradually depreciate. This scenario contradicts the prediction that the successful election of Tinubu as the President-elect would lead to further currency depreciation.

In 2022, the naira lost almost a third of its value on the parallel market due to Nigeria's inability to benefit from higher commodity prices, an extended shutdown of oil production facilities, and crude pipeline vandalism and theft. Forex reserves steadily depleted during the year, leading the CBN to halt dollar sales in the parallel market, further reducing supply and contributing to the naira's weakness.

To stabilize the naira, the CBN has taken major steps, including introducing the naira-for-dollar policy, which allows foreign currency recipients to earn N5 for every dollar sent. The policy was expected to provide Nigerians in the Diaspora with cheaper and more convenient ways of sending remittances to the country.

CBN Governor, Godwin Emefiele, said the policy implementation would increase the transparency of remittance inflows and reduce rent-seeking activities. He expressed optimism that the policy extension would encourage banks and financial institutions to develop products and investment vehicles geared towards attracting investments from Nigerians in the Diaspora.

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AZA Finance All Bola Ahmed Tinubu Ikenga Kalu Tinubu


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