These are definitely not interesting times for the nation’s economy, particularly the national currency, the naira, no thanks to the depleting reserves and the subsequent banning of importers of 41 items from the foreign exchange market by the Central Bank of Nigeria.
Barely 10 days after the CBN stopped forex sale to importers of rice, textile and 39 other items, the naira on Wednesday crashed to 230 against the United States dollar at the parallel market, down from 218 recorded on June 23 when the new forex rule was introduced.
The policy, which has pushed huge forex demand from the interbank (official) market to the parallel (black) market and the Bureau de Change retail segment, has led to artificial scarcity of dollar and other major foreign currencies as operators now hoard them in anticipation of higher prices.
The naira had fallen to 220, 223, 226.5 and 228 against the dollar in the past one week.
Black market and BDC operators, however, told our correspondent that serious dollar liquidity squeeze was already hitting the market and operators were no longer in possession of huge stock of forex to meet rising demands, especially from the importers of the banned items.
Using the CBN figures, analysts had estimated that about $5.7bn quarterly forex demand was being transferred from the official interbank market to the black market.
“The situation is getting critical now. There is serious dollar liquidity squeeze in the market now. The demand is overwhelming and both the black market and the BDC segment can no longer meet the demand,” a black market operator told our correspondent on Wednesday.
“The market is very volatile now as a result of the restrictions placed on about 41 items by the central bank. Most importers are now patronising the parallel market to source their dollars,” the head of a BDC, Mr. Harrison Owoh, told Reuters on Wednesday,.Meanwhile, the Association of Bureau De Change Operators has written to the CBN asking it to intervene in the dollar scarcity in the parallel market and the BDC segment to save the naira from crashing further.
In the letter, a copy of which was obtained by our correspondent, the association expressed its readiness to work with the CBN to stabilise the market.
The letter, signed by association’s President, Alhaji Aminu Gwadabe, and Executive Secretary, Uduma Cletus, advised the CBN to increase its weekly forex sale to the BDCs from $30,000 to $50,000.
The body also asked the central bank to reintroduce the autonomous market where it could sell about $100,000 to the operators.
Gwadabe told our correspondent that it was expedient for the CBN to increase its forex sale to the BDCs in order to stabilise the naira.
Some analysts believe the naira may hit 240 against the dollar in the coming days.
However, the naira traded at 198.95 to the dollar at the interbank market on Wednesday, according to Reuters.
The central bank had lowered its exchange rate peg to N196.95 to the dollar on Tuesday from N196.90 last week
Also, a trade of $735.74m went through on Nigeria’s interbank currency market at N198.45 on Wednesday, Thomson Reuters data showed.
Market sources said a foreign client had sold dollars to a bank in Nigeria. Total interbank market volumes stood at $1.12bn on Wednesday, far higher than typical trading sessions since the central bank introduced a naira peg in February.
Meanwhile, the CBN has reminded dealers and banks that their dollar cash sale for six items, including schools fees, insurance premium, basic travel allowance and monthly mortgage should not exceed $5,000.
In a new circular dated July 1, 2015, the CBN also warned banks not to sell forex to the importers of the 41 items that were banned from the forex market last week.
ReplyDeletewhere is president Buhari with his economic magics? He promised to make N=$ instead Naira is becoming toilet paper. When would Mr president bring his miracles to rescue Nigeria from economic and security deserter? How long shall we be patient to reach the promised Land, an apology to late Sunny Okusun. How long shall we give Alhaji Buhari to come up with economic measures, Hopefully, not when 2/3 of Nigerians are dead? What again is General Buhari waiting for before waking up from slober? Is Mr president not touched by this general suffering of Nigerians? Is this massive depreciation of Naira Jonathan's faults? But we know the exchange when Jonathan left the government. Within 30 days of indecision and inaction of Mr President, Naira has depreciated in percentage than ever.
I believe that this government non appointment of ministers, advisers and make his economic policies known has pressure on NAIRA. LET MR PRESIDENT HAVE HUMAN FACE. State civil servants are not paid, cost of goods and services are sky rocketing. Inflation rate is becoming uncontrollable. I hope Buhari brings Goodluck. This is terrible.
Let it hit 500...I believe it's time to see reality,diversify economy and be sincere to ourselves.first by burying corruption.
ReplyDeleteBUHARI AND APC ARE WAITING TO BLAME GEJ AND OKONJO-IWEALA FOR NAIRA'S FREE FALL. IT APPEARS BUHARI DOESN'T KNOW WHAT TO DO WITH THYE PRESIDENCY NOW THAT HE GOT IT.
ReplyDeleteWhat has the present administration being able to do to curb the continued fall of the Naira against the Dollar? It is seemingly obvious that APC has no road map on how to tackle the challenges bedeviling the country. They "sold" fake "change" to Nigerians in order to be voted into power. Since winning the presidential election, they themselves have been experiencing internal crisis. Besides, second month in office, no Cabinet and Ministerial appointments, which is unheard of in the history of Nigeria.
ReplyDelete