The Central Bank of Nigeria (CBN)’s fixed exchange rate of N386 per dollar may not be sustainable as Naira fell to N445 at the weekend from N440 on Friday morning.
With the current rate, Naira is losing N5 per dollar. While the dollar was trading at N445 in Apapa and Eko hotel, it was selling at N440.at Festac area of Lagos.
At the retail Bureau, the local currency weakened by N1.00k to N441 on Friday from N440 on Thursday. The foreign exchange market at Investors and Exporters (I&E) forex window opened with an indicative rate of N386.69k on Friday. This signaled N0.21k depreciation when compared with N386.48k opened with on Thursday.
The market closed with Naira gaining marginally by N0.12k as the dollar was quoted at N386.13k on Friday as against N386.25k quoted on Thursday, data from FMDQ indicated.
Daily FX turnover at I&E window declined by 3.29 percent to $89.15 million on Friday from $92.18 million recorded on Thursday.
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The Naira depreciation is attributed to the resurfacing of dollar shortages on the black market. However, Naira is expected to strengthen on Monday when the CBN resume dollar sales to Bureau De Change (BDC) operators.
Meanwhile, over 5,000 BDCs have funded their accounts on Friday, Aminu Gwadabe, president, National Association of Bureau De Change Operators (ABCON) told BusinessDay.
The CBN had in a circular last week signed by Ozoemena Nnaji, director, trade and exchange department, announced the applicable exchange rate for the disbursement of International Monetary Transfer Operators (IMTOs) proceeds as follows: IMTOs to sell to banks at N382 per dollar, banks to CBN at N383 per dollar, CBN to BDCs at N384 per dollar, and BDCs to end-users at not more than N386 per dollar.
Analysts and industry watchers doubt the sustainability of the fixed rate for BDCs by the CBN. Taiwo Oyedele, head of tax PwC said the ability to sustain the rate of N386 prescribed by the CBN for dollar sale by BDCs will depend on whether the CBN itself can sustain the allocation of dollars to the BDCs to meet the demand in that segment of the market some of which is speculative.
The CBN is expected to supply about $100 million to 5,000 Bureau De Change (BDC) operators across the country as it resumes dollar sales to them on Monday.
The regulators said it would allocate $10,000 twice a week to BDCs. This implies $20,000 to 5,000 BDCs will amount to $100 million in a week.
“It will crash further as soon as the CBN resumes sale to BDCs on Sept 7. A lot of dollar demand in the black market is artificial,” Uche Uwaleke, a professor of capital market at Nasarawa State University Keffi, said.
Akintunde Olusegun, the financial market analyst at Polaris Bank Limited, said While the resumption of sale is expected to result in an immediate appreciation of the Naira regardless of the quantum of sale to BDC – it will not be enough to meet the FX needs of end-users given the amount of backlog that exists. More also some manufacturers and SMEs have resorted to the parallel market in meeting their FX needs.
“The reduction will have little effect in curbing the country’s FX pressure because as demand for FX persists across all segments of our economy,” he said.
“We expect the parallel market rates to continue to converge towards the official markets as speculative supply continues to hit the streets, however, we anticipate this lower rates to be short-lived as the market continues to show doubts of the size of the CBN’s war-chest to meet up the long outstanding demand for the greenback”, analysts at Zedcrest Capital Limited said.
