Naira firms at N730/USD, but analysts say gain unsustainable

The recent recovery of the naira against the dollar, though good to tame the tide of rising inflation in the country, may not be sustainable, analysts have said.

Nigeria’s local currency, which has been falling against major currencies in recent weeks, bounced back on Thursday as it exchanged for about N730 to a dollar on the parallel market.

The currency dropped to an all-time low of about N850 to the US dollar on the black market following the Central Bank of Nigeria’s announcement of plans to withdraw, redesign and reissue the N200, N500 and N1,000 banknotes.

Following the CBN announcement, some analysts had raised concerns that the race to dump the old notes would push up the demand for the dollar as some hoarders of the old notes would seek refuge in the dollar, worsening the country’s foreign exchange challenge.

That had been the situation in the past few weeks, until the naira reversed its losing streak against the dollar on Thursday.

The recovery of the naira, according to black-market traders in Lagos, is a result of the local currency’s scarcity, leading to the inability of speculators buying dollars to offer higher rates for the green back.

One currency dealer in Central Lagos District, the heart of the financial market, was reported to have said there is no naira in the system.

But AZA Finance, in a note to clients on Thursday, said the naira gain may be shortlived.