Christmas shopping in Dubai occasioned by Emirates Airline resumption of flight between Dubai and Nigeria is now driving demand for the dollar despite selling off of hoarded foreign exchange (FX) by speculators, BusinessDay findings show.
Calculations based on information provided by one of the travel agencies show that 6,860 people travel to and fro Dubai weekly.
Exchange rate, which crashed to N540 by the second week of November 2021, has spiked again to an average of N569 per dollar in the open market as of Wednesday.
One of the Bureau De Change (BDC) operators who pleaded anonymity said a lot of Nigerian importers go to China and other Asian countries such as Hong Kong, Turkey, the Middle East among others for business transactions.
“People are still buying dollar in the parallel market. They cannot stop buying dollar unless there’s a significant reduction in importation,” Andrews Elueni, managing director, Flawless Capital Limited, told BusinessDay on Wednesday.
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Elueni, who has a demand of $50,000 to meet on behalf of a client for a refinery licence said he could not secure such an amount from the banks as they said it was beyond their capacity following the rules by the Central Bank of Nigeria (CBN).
On July 28, Nigeria’s Central Bank stopped selling hard currency to the Bureaus De Change (BDC) operators. New BDC licences were also suspended and the CBN instead channelled the sale of foreign exchange for legitimate needs only to commercial banks.
Such legitimate needs include Business Travel Allowance (BTA), Personal Travel Allowance (PTA), school fees and medicals.
“My position is it is not just to restrict sales of dollar to the BDCs but the government should reduce importation and encourage exports.”
He was concerned that a lot of people depend on importation of food supply as Boko Haram and insurgence have hampered production of farm produce by farmers, leading to demand for foreign exchange.
He also noted that some government officials purchase dollars that they are not able to consume, but come back and sell at the unofficial market.
Nigeria’s trade balance worsened in the third quarter of 2021 as imports surged and the trade deficit hit N3.02 trillion, according to the latest foreign trade report by the National Bureau of Statistics (NBS).
On dollar inflows, the BDC operator said supply is not commensurate with demand as some people who go to the banks to purchase dollars could not get due to documentation issues.
The operator admitted that inflows come into the country but not as expected. The operator disclosed that there are some inflow markets abroad which a lot of people do not know about.
Some importers who could not get enough dollar supply patronise such inflows abroad at a very high cost, he said. The CBN limits the amount of dollar purchase for PTA to $4,000 and BTA for $5,000 quarterly.
Nigeria’s currency registered marginal depreciation in all the market segments, reflecting the effects of the previous month’s policy on the stoppage of sales to BDCs and the perceived supply shortages. The naira depreciated by 1 0.03 percent at the I&E windows, in August 2021, according to the latest economic report of the CBN.
Available data from the CBN show that the average foreign exchange turnover at the investors and exporters’ window was $126.18 million in August 2021 indicating a decline of 24.1 percent, compared to $166.16 million in July.
