By FDC Research,
December is the month when the Naira usually gets stronger in the forex market. So why has it lost approximately 3%-4% in the last week and why are traders and investors getting more jittery?
The external reserves have increased by 0.75% after an extended period of depletion, the price of cocoa is at a high of US$2,145 per tonne. This is the season for the main crop harvest and inflows of approximately US$429 million are expected.
The visiting friends and relatives of Nigerians control at least 5% of Nigeria Diaspora remittances (US$22bn), meaning an inflow of approximately US$1.1bn in a six week period.
The price of oil has lost 30% from its high in October but it is still trading at US$58pb whilst production is up at 1.8mbpd. Therefore, why the anxiety and why is the forex market turning into a speculator’s paradise? It all comes down to the political risk premium and investor jitters building up towards an election season.