It is no doubt that the new trendsetter as far as the Nigerian economy is concerned is the naira in relation to its value when compared with the dollar. It is like a weekly occurrence that the naira will either experience an increase in value or a further decrease more than we have ever had it.
The latest of this is the further crash from N382 on Tuesday to N391 on Wednesday in the parallel market. An analyst has blamed this slide on the demand pressure for the dollar. He further attributed the recent development to the fact that the banks which should be regulating foreign exchange transfers are yet to comply with the directive to sell FX to only approved Bureau de Change.
Interestingly and surprisingly for me, the inter-bank rate strengthened from N311.03 to the dollar yesterday, more than N316.83 to a dollar from the previous day.
My confusion is that I thought rates in the banks and parallel are related in such a way that if there is an increase in the banks or officials then there will be a corresponding increase in the parallel market. This development has thought me this lesson it is not always so and that a higher (like it is on the parallel market) can force the dollar to go up thereby affecting the naira value.
Economics is not straightforward as we all were taught in high school. Demand and supply can actually act independently without affecting each other directly or proportionately.