As keen observers noted, the Naira, fresh from falling to record lows of N380 per dollar fell to as low as N290 per dollar yesterday, more than a 20% drop in a day. So what happened?
Either someone dumped a whole lot of dollars on the markets yesterday, or someone spread news that they were going to dump a bunch of dollars on the market soon. Either way, it led to something close to panic with everybody else dumping their dollars too.
But of course the fundamentals have not changed. Oil, still Nigeria’s only export, is hovering around $30 a barrel. There is no other source of foreign exchange. So just like when you pour a lot of water down a the drain it takes a while to flow out, the bunch of dollars dropped on the market yesterday will take a while to flow out. Or the news will take a while to be forgotten.
Either way the market volatility hurts businesses probably even more than a devaluation. Only thing worse than a high price is an unkown price. The naira struggles continue. Stay tuned.