Forex Traders Jittery Over Free Float Reports

Foreign exchange traders at the parallel market became jittery following reports of possible free float of the Naira on Wednesday.

This is as commercial banks and dealers in the forex market said they have been given the green light by the apex Bank to sell forex freely, which is at a market-determined rate.

President Bola Ahmed Tinubu had in his inaugural speech emphasised the need to harmonise foreign exchange rates in the country.

Although the Naira still trades at N760 to a Dollar at the parallel market, currency hawkers say they were unsure of which way the market will swing in the coming days with the latest news.

“We bought at N760 on Tuesday but now we are selling at N760. Which is almost a loss. So we are careful until we know which direction the market is going,” a parallel market trader said on Wednesday.

The currency was initially quoted at between N750 and N755/$ before strengthening to close at N664/$, according to FMDQ data.

Analysts at Proshare, a financial information news medium, explain that the merging of the rates should lead to a depreciation of the local currency in the official market, but the parallel market should see an appreciation.

The official rate could fall between N600/$ and N650/$.

The initial understanding of this message is that banks can now sell forex at market-determined rates, suggesting Nigeria is now operating a freely floating exchange rate.

However, official confirmation will have to come later in the day when data from the FMDQ is available.