FX Speculators Count Losses as Naira Appreciation Exceeds Expectations

By Adedapo Adesanya

Speculators in the Nigerian foreign exchange (forex) market are counting losses with the Naira appreciating heavily against the greenback across several windows in the last few days.

The development has been tied to the new foreign exchange framework introduced by the Central Bank of Nigeria (CBN) recently as well as inflows from Nigerians living in the diaspora who are returning to the country for the festive season.

The apex bank had on Monday, December 2, launched the Electronic Foreign Exchange Matching System (EFEMS), an electronic platform introduced to tackle speculation and improve transparency in Nigeria’s foreign exchange market.

In a circular announcing the EFEMS platform, the apex bank explained that it facilitates spot foreign exchange transactions between the Naira and the US Dollar.

The platform, operated through Bloomberg’s BMatch system, requires a minimum trade value of $100,000, with incremental trade sizes of $50,000.

CBN also stated that the platform automatically matches buy and sell orders, promoting fairness and efficiency in FX trading.

The EFEMS system allows authorized dealers, including commercial banks, to place buy and sell orders in real time.

Transactions are automatically matched based on predetermined rules, ensuring swift execution and real-time visibility for market participants and regulators.

This has started bearing fruits with early signals indicating that speculators holding foreign currencies, particularly the US Dollar, have seen the value of their money drastically drop due to the appreciation of the local currency.

This is now forcing them to dump FX into the system and take the domestic currency alternative.

Business Post reports the Naira recorded a 3.3 per cent or N52.80 appreciation on the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Monday, December 9 to close at N1,552.50/$1 compared with the preceding session’s rate of N1,605.30/$1.

This is also seen in the parallel market with the local currency trading within a  low of N1,590 per Dollar to N1,630/$1 on Tuesday afternoon.

This newspaper also learned that many speculators are offloading their foreign currencies in panic for the local currency to avoid losses, which might ease the pressure, but there are fears that the demand for FX might happen after the holidays.