Forex Scarcity Sends Naira Tumbling to N930/US$

 

Naira on Wednesday exchanged N930/ $1 at the parallel market, down from N925 mid last week, according to Vanguard.

 

This is as the exchange rate improved week-on-week in the Investors and Exporters (I&E) window to N758.1 from N775.6.

 

The prevailing exchange rates indicates a rising parallel market premium which is the gap between the parallel market rate and that of the I&E window.

 

The gap, as at last week Wednesday, was N153.41 per dollar, but has risen to N171.9 per dollar by yesterday, a development which has created a huge incentive for round-tripping and arbitraging in the foreign exchange market ecosystem.

 

Moreover, market observers have also noted that the Bureau de Changes, BDCs, have not helped the market as envisaged a month ago when the segment was re-admitted into the Central Bank Of Nigeria, CBN, official trading window for the purpose of opening the market to more independent forex supply and better access for individual retail end users.

 

The BDCs have, instead, lamented that the renewed depreciation of the local currency was mainly due to the scarcity of the foreign currencies.

 

A BDC operator told Vanguard that the scarcity is so much that ‘‘even some Nigerians are unable to withdraw forex from their domiciliary accounts in banks”.

He said the lifting of the ban by the CBN on sales of forex to BDC operators has failed to help resolve the scarcity as the banks are not selling to the BDCs.

 

Data from FMDQ showed that the market opened at N761.24 to the dollar, recording a high of N807.15 and a low of N738.

 

A total of $42.26 million was traded in foreign exchange at the I&E window. 

 

On Tuesday, CBN said a review of the change in the forex regime showed that banks are in a position to profit from its potential to significantly increase the naira value of banks’ foreign currency (FCY) assets and liabilities.

 

The apex bank directed deposit money banks, DMBs, to stop utilising gains from the revaluation of the naira to pay dividends or finance operations.

  

Commenting on the renewed depreciation of the naira even with the lifting of ban on sale of forex to BDCs, Prof Uche Uwaleke, President. Association of Capital Market Academics of Nigeria, ACMAN said: “Recall that the ban was placed in the first place due to the abuses associated with the selling of Forex to BDCs due to their large and unmanageable number.

 

Allocation of forex to BDCs may not address scarcity- Adonri

 

Also commenting, David Adonri, analyst and Executive Vice Chairman at Highcap Securities Limited, said: “Since BDCs are authorized retail dealers licensed by CBN, sale of forex to them is in order.

  

Another financial expert, Victor Chiazor, Head of Research and Investment at FSL Securities Limited, said: “The CBN’s decision to lift the ban on sale of Forex to BDCs would have aided liquidity in the FX market if the CBN actually had enough FX in its vaults.