• Thursday, March 28, 2024
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BusinessDay

CBN’s $1bn sales to BDCs fail to shore up naira value now at N474.50k

Naira and Dollar

Nigeria’s currency has continued to depreciate against the dollar after the Central Bank has intervened with about $1 billion sales to the Bureau De Change (BDC) operators for the past three months.

The foreign exchange market has been under pressure since March 2020 following a sharp drop in oil prices as a result of Covid-19 pandemic.

Naira on Monday weakened by N1.00k as the dollar was trading at an average rate of N474.50k compared to N473.50k traded on Friday on the black market.

Against three months ago when the CBN resumed dollar sales in September 7, 2020, naira has depreciated by N35 from N440 in September to N475, which is the current cost of dollar in some parts of Lagos.

BusinessDay gathered that Apex bank sells $10,000 twice weekly to over 5,000 and haven allocated this amount for 10 weeks shows that the regulator has sold about $1 billion to BDCs across the country.

Over 5,000 on Monday funded their accounts in anticipation of dollar disbursement by the CBN on Tuesday.

“We have not really known the value of naira at this present time. The N475 the dollar is trading now is just telling us that naira will continue to depreciate. A lot of scholars have said that it is because the CBN is trying to manage the naira,” Olalekan Aworinde, Senior Lecturer, department of economics, Pan-Atlantic University, Lagos, said.

He said what determines the exchange rate of a particular country with respect to another has to do with the demand for that particular currency. “So there is no huge demand for the Nigerian currency. Dollar is appreciating every day and the naira is not.”

Nigeria’s external reserves, which give the regulator the fire power to conserve the value of naira have declined by 0.15 percent to $35.613 billion as at November 12, 2020 from $35.767 billion as of September 7, 2020, data on the CBN’s website show.

Aworinde said there are so many things that the CBN can do in an attempt to ensure that the naira does not continue to depreciate.

“What we need to do is to strengthen our capital market. If the capital market is well developed there is a possibility that people are not likely going to demand for dollar but come to capital market to invest. Once the capital market is developed, it would push up the value of naira. That means that people will continue to demand for naira rather than dollar,” he said.

Aside from that he said the value of the Nigerian currency will continue to depreciate as far as Nigeria is still import dependent. Nigeria is more of a consuming nation rather than a producing nation. These are the things that will make the naira to deprecate.

“What the CBN can do which is in a way a bit above them and more of the fiscal side, is let the government provide enabling environment. When this is provided, a lot of investors would come to Nigeria, they will demand for Nigerian currency. When the country begins to produce and export Nigerian currency will appreciate, Aworinde told BusinessDay by phone.

However, the local currency was stable at the Investors and Exporters (I&E) forex window and the BDC segment, as the dollar was quoted at N386.00k and N474 respectively.