Nigeria’s currency on Thursday lost N9.50k to the dollar, a day after the country’s central bank (CBN) sold $50 million to 5,000 Bureau De Change (BDC) operators in the second tranche of its dollar sales for the week.
With Wednesday’s dollar allocation, the CBN has sold a total of $101.8 million to BDCs this week.
Dollar traded at an average rate of N453 on Thursday as against average rate of N443.50k traded on Wednesday on the black market.
The naira depreciation is attributed to increased demand by end users who are either travelling or buying to meet import obligation. Another reason is the speculative activities of traders.
Nigeria’s central bank resumed dollar sales to Bureau De Change (BDC) operators on Monday, September 7, 2020, selling $51.8 million to 5,180 BDCs across the country.
BusinessDay had reported that the CBN would supply about $100 million to some 5,000 BDCs this week, in two tranches of $10,000 per supply to each BDC.
But this dollar allocation could not strengthen the value of naira, which has continued to fluctuate in response to forces of demand and supply.
BusinessDay survey of three areas of Lagos where black market operators operate revealed that the dollar, which sold for N442 on Wednesday, rose to N455 on Thursday in Festac Town. At the Lagos airport, it went up to N444 on Thursday from N440 on Monday, and at Eko Hotel, the naira fell to N460 per dollar from N445 on Wednesday.
However, the traders can buy from individuals at the rate of between N440 and N450 across the parallel markets in Lagos.
At the BDC segment of the market, naira also weakened by N11.00k as the dollar was sold at N455 on Thursday compared with N444 sold on the previous day.
The second session of supply of dollars by the CBN to BDCs came in on Wednesday, although having little impact on rates as the demand on the streets continued to swallow the CBN’s supply. The cash rate remained unchanged while the transfer rate strengthened by N2.00k to close at N455.00/$, analysts at Zedcrest Capital Limited said.
At the Investors and Exporters (I&E) forex window, the market opened with an indicative rate of N386.57k on Thursday, which signalled marginal depreciation of N0.11k when compared with N386.46k opened with on Wednesday, data from FMDQ revealed.
The CBN is expected to allocate another $10,000 to each of the over 5,000 BDCs on Monday as the BDCs fund their account on Friday.
The CBN chose a gradual foreign exchange supply of $10,000 twice-weekly to BDCs to edge out speculation in the market.
With the new amount of FX allocation, the BDCs are losing about 73.3 percent or $55,000 when compared to $75,000 they were getting from the CBN before the outbreak of Covid-19 pandemic.
Aminu Gwadabe, national president, Association of Bureau De Change Operators of Nigeria (ABCON), said the $20,000 weekly is at first instant as the CBN watches developments in the market.
“I believe that clause is to allow CBN flexibility and intervention in the market where necessary to checkmate unethical practices of hoarding and speculation. I believe both operators should be wary of the CBN surprises to avoid taking losses. I believed the $20,000 weekly for over 5,000 BDCs should provide liquidity for genuine travellers and school fees payments,” he said.
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