Naira Loses 10.8% Despite Increased Dollar Sales
Respite failed to come the way of the naira last week as the currency further declined by 1.2 per cent or N5 at the parallel end of the foreign exchange market. Having started the week out at N405 to the dollar, the naira closed the week at N410 to the greenback.
This is despite increased dollar sales by the Central Bank of Nigeria, which had opened up more forex windows to increase liquidity at the official forex market. Asides selling $10,000 to each bureau de change operator twice a week, the CBN also sells dollars for wholesale spot and forwards as well as for invisibles such as medicals, school fees, basic and personal travel allowance.
Last week, it sold $450 million to banks to meet spot and forwards demand as well as through the new Small and Medium Enterprises window. This is higher than the $312 million it pumped into the economy the previous week through dollar sales at the interbank and bureau de change ends of the foreign exchange market.
The value of the naira had in the past three weeks dropped by 10.8 per cent weeks from N370 to $410 which it closed last week despite the increased dollar sales by the apex bank. BDC directors had met last week promising to work towards raising the value of the naira at the black market.
The decline in the value of the naira on the streets had further widened the gap between the rates at the interbank and parallel markets to N50, a gap that had been cut to less than N10 three weeks earlier.
Head of Research at Afrinvest West Africa, Robert Olatunde, said the declining value of the naira at the parallel market could be linked to the exclusion of the 41 items from the eligible for foreign exchange at the interbank market.
He noted that analysts at the investment firm “continue to see foreign exchange rate trending within the band of N390– N400 per dollar in the parallel market pending a review of the 41 items exempted from accessing forex at the official market.”
However, the president of the Association of Bureau de Change Operators of Nigeria (ABCON) Aminu Gwadabe differed saying the renewed activities of speculators at the parallel market had led to the weakening of the currency on the streets.
He however noted that the speculators would once again have their fingers cut as the association is working towards ensuring that the value of the dollar crashes at the parallel market.
Meanwhile, he said the profit margin of N2 which was given by the CBN is small and needs to the reviewed upward. Rising from a general meeting yesterday, the BDC operators said they want the apex bank to increase their margin to N10 per dollar and also increase the volume of dollar allocations to be increased to $50,000 per week.
Gwadabe who assured that the members of the association will work towards ensuring stability in the foreign exchange market said “we have told the regulators that it is small, in other climes there are margins that are up to 10 per cent. The margin of N2 we feel is still small so let the CBN review that margin to at least N10 per dollar.”
He noted that the BDCs have resolved to challenge the spike and volatility in the foreign exchange market, saying “we will cooperate with the CBN as we always do to see that we narrow the gap between the parallel market and the official market.
“There are a lot of pressure even from the International Monetary Fund (IMF) which says our naira is overvalued there are pressures from speculators, there are pressures from black market operators, there are pressures from people that carry hot money, all these is happening in the market and it is really driving the rate, we are looking at a very acceptable margin between the official and parallel market rate, say a maximum of 5 per cent.”
