Dollar likely to reach an all time high of N600/$1

 Nigeria's Exchange rate is at risk of crossing N600/$1 at the unofficial FX Market, as foreign investors that were given their dividends for the 2021 financial year seek to repatriate their earning

Naira seems to be having fun with the highest, as it currently trades at a record high of N588/$1 on the black market, as the demand pressure drives the rate higher. Similarly, the peer-to-peer market exchange is trading at N583/$1.

Nevertheless, the Nigerian currency is at the risk of further depreciation after the declaration of dividends by leading corporations in the local equities market to their shareholders, which involves foreign investors who want to repatriate their funds.

Companies like GTCO, Zenith Bank, Dangote Cement, Lafarge Africa, Access Bank, Nigerian Breweries, MTN Nigeria declared their final dividends in Naira for their 2021 fiscal year, while Seplat Petroleum declared a dividend per share of $0.075. However, some of these dividends were paid in March, while others are to be paid in April and May 2022.

Investors who want to take home their dividends or earnings will have to go through the stress of exchanging them for dollars which will further drive the rate higher as most of these dividends were declared to be paid in local currency.

However, the recent data released by the National Bureau of Statistics reveals that Nigeria’s capital importation declined to its 5-year low of $6.7 billion in 2021. The decline was linked to a significant decrease in direct and portfolio investments.

A glare at the NGX foreign portfolio report showed that foreign transactions on the local bourse dropped by 40% to N424.5 billion from N729.2 billion recorded in the previous year. FPI contribution to the total trade on the NGX also dropped from 33.63% to 22.88% in the review year.

Bureau De Change operators in Lagos State said that the forthcoming election in 2023 is already harming the FX market, as demand for forex has outweighed supply, which has further affected the exchange rate.

One of the Bureau De Change operators in Lagos State explained that stakeholders are now buying and keeping FX for their selfish interests, politicians are buying & keeping FX for their 2023 campaigns, which has affected the liquidity in the market with supply not moving.

Anwal Usman, a Bureau De Change (BDC) operator in Lagos, mentioned that the unpredictability in the FX market is associated with the weak supply of forex while demand has increased in recent weeks.

“Dollar demand has increased significantly, especially since the election is fast approaching, which is why the exchange rate has gone up,” he said.

While Nigerians are still wrestling with the hike in prices of commodities, the global energy crisis, food inflationary pressure, volatile power supply, further depreciation in the naira will cause more harm to average Nigerians.