The pressure on Nigeria’s currency intensified on Wednesday as black market speculators have taken advantage of the Central Bank of Nigeria (CBN) newly adopted exchange rate to buy up and hoard dollars.
Consequently, the naira fell to N493 per dollar on Wednesday, the lowest since November 30, 2020, when it weakened to as low as N510/$.
It was on that same day the CBN amended its foreign exchange (FX) rule by announcing that beneficiaries of diaspora remittances through the international monetary transfer operators (IMTO) should have such inflows in foreign currency (US dollar) through a designated bank of their choice.
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The essence of the policy change was to deepen the foreign exchange market, provide more liquidity and create more transparency in the administration of diaspora remittances into Nigeria.
Afterward, the naira strengthened to N473 per dollar in February 2021, the highest since the foreign exchange policy amendment by the CBN in November 2020.
The CBN has since then introduced other policy measures to boost liquidity in the foreign exchange market.
On March 6, 2021, the CBN introduced the naira-for-dollar scheme as an incentive to boost inflows of diaspora remittances into the country.
The new policy on remittance flow allowed for payment of N5 for every one dollar received by all recipients of diaspora remittances through the CBN licensed IMTOs.
After two months of trial period, the CBN extended the naira-for-dollar scheme till further notice, but market realities show foreign exchange is still under pressure.
Last week, the CBN removed the official exchange rate of N379 per dollar from its website, as it adopted the I&E window as the official rate. On Tuesday, the regulator officially adopted N410.25k as the official rate by publishing it on its website.
This has triggered speculation on the black market as naira weakened by 1.44 percent to N493 per dollar on Wednesday from N486 traded on Tuesday.
However, in some areas in Lagos markets like Apapa, Eko Hotel and Airport Road, dollar is being sold at N490.
“On the CBN Nigerian Autonomous Foreign Exchange (NAFEX) rate, you have a unified rate to N411. I think the crowing peg will begin to climb to N420 gradually without any panic. I expect that to happen together with increased supply of liquidity, which will help mop up excess naira liquidity, stabilise expectations, and that will begin to allow the Parallel Market to appreciate,” Bismarck Rewane, CEO, Financial Derivatives Company Limited, says.
The naira depreciation followed the adoption of N410.25k as official rate by the CBN. The new official rate shows an 8.24 percent devaluation from N379/$ previously. It also shows N72.75k spread from Parallel Market rate of about N483 per dollar.
The naira also depreciated marginally by 0.09 percent at the Investors and Exporters (I&E) forex window on Wednesday morning. The market opened with the naira being quoted at N411.38k as against N411.00k quoted the previous day, data from the FMDQ indicated.
The foreign exchange daily turnover declined by 38.40 percent to $130.50 million on Tuesday from $211.86 million recorded on Monday.
At the Bureau De Change (BDC) segment of the foreign exchange market, naira is still trading at N486 per dollar on Wednesday after weakening by N1 from N485 traded on Monday, Abokifx rates showed.
Over 5,000 BDC operators across Nigeria are expected to fund their accounts today in anticipation of dollar disbursement on Thursday by the CBN. The apex bank sells $10,000 twice weekly to each BDC operator.
Aminu Gwadabe, president, Association of Bureaux De Change Operators of Nigeria (ABCON), last weekend, projected that foreign exchange speculators would lose over N100 billion in the next one month as the CBN sustains massive funding for Bureaux De Change (BDC) operators.
The CBN is committed to improving funding for over 5,000 BDCs nationwide in a new move to deepen market liquidity and protect the naira against speculators, he said.
He attributed the continued fall of the naira at the Parallel Market and the I&E forex window to currency speculators hoarding dollars to profit from the currency crisis.
