The Abuja foreign exchange is experiencing a period of volatility following recent announcements by the Central Bank of Nigeria (CBN).
A visit to Wuse Zone 4, a major foreign exchange hub in Abuja, reveals a confusing situation for potential buyers. Currency traders are offering the dollar at varying rates, with some quoting N1,250/$ and others as high as N1,330/$. This inconsistency creates uncertainty for those seeking to purchase dollars.
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Despite the price disparity, a general consensus exists among traders that holders of foreign currencies are cautiously selling their holdings. This measured approach suggests a wait-and-see attitude, where market participants are gauging the long-term impact of the CBN’s actions.
Traders in the parallel market remain unconvinced that the dollar price will experience a significant drop in the coming week. The CBN’s decision to sell $10,000 to Bureau De Change (BDC) operators at a rate of N1,200/$ with a 1.5% spread is viewed with skepticism. Many believe this price point may not be enough to entice a substantial downward movement in the parallel market.
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The recent decision by the Monetary Policy Committee (MPC) to raise benchmark interest rates has instilled a sense of panic in the parallel market. Traders anticipate an influx of portfolio investors seeking to capitalize on the higher interest rates offered on Naira-denominated assets. This potential inflow of foreign exchange could theoretically lead to a decrease in the dollar price. However, the extent to which this materializes remains to be seen.
The Abuja foreign exchange market is currently in a state of flux. The combined effects of the CBN’s policy adjustments – increased dollar sales to BDCs and a higher interest rate – are yet to be fully understood. In the coming days and weeks, market participants will closely monitor exchange rates and adjust their strategies accordingly.
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