Naira Defies CBN’s Interventions, Falls To N1,510/$
The depreciation of the naira continued over the weekend as the currency traded at N1,510 to a dollar at the parallel market and 1,466.31 at the official market.
The dollar-to-naira exchange rate increased by N40 between Thursday and Friday, having earlier closed at N1,426 to a dollar, according to the National Autonomous Foreign Exchange Market (NAFEM), the official exchange market.
Following a string of reforms and interventions by the Central Bank of Nigeria (CBN), the naira had, in recent times, firmed up against the dollar, exchanging below N1,000.
The apex bank had also supplied dollars to the Bureau De Change (BDC) operators in a bid to boost liquidity in the market.
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The dollar exchanged at N1,450 Friday morning but closed the day with N1,510 at the black market.
A Bureau De Change operator who spoke to our correspondent yesterday said: “We have seen more demand in recent times, and this is what is causing the increase. I can tell you also that there is no enough dollar supply, and this is why the rate is increasing.”
Daily Trust on Sunday reports that the CBN had sustained dollar sales to registered BDC operators under the aegis of the Association of Bureau De Change Operators of Nigeria (ABCON).
It had on April 23, 2024 sold dollars at a discounted rate of N1,021 per dollar, the second time in the month and fourth time in 2024 as part of measures to stabilise the naira.
In February 2024, the CBN announced the sale of $20,000 to each BDC at the rate of N1,301/$. Subsequently, it reduced the allocation by 50 per cent and sold FX at the rate of N1,251/$1.
Other reforms by the CBN included substantially clearing foreign exchange backlog, including airlines’ trapped funds and taking action to stop speculation with the raids on unregistered BDC operators.
Despite the interventions, the crisis has persisted as the naira was rated the world’s worst-performing currency over the last month, according to a Bloomberg report.
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Speaking to Daily Trust on Sunday yesterday, the president of the ABCON, Aminu Gwadabe, said it was unfortunate that the gains of recent reforms and interventions by the CBN were being reversed.
He confirmed that the exchange rate was N1, 490 as at yesterday and blamed the depreciation on inadequate supply of the dollar.
He said: “The real issue is still the question of liquidity. The dollar is not available; and there is dollarisation of the financial system. People are really worried about the inflation rate that is hitting deep into the value of the naira. Some people say it is better to buy dollars now than to keep the naira.”
He called for amnesty for those hoarding foreign currencies in their homes to bring them out.
“There is a need for amnesty. A lot of people still have dollars in their houses. It is a crisis and stormy period. Sometimes we would not just remain at maximum compliance, voluntary compliance is key to effective regulations.
“Over regulation is toxic to effective compliance. People who keep dollars at home should be given amnesty, with less questioning to ensure liquidity,” he stated.
Gwadabe also asked the CBN to open up other channels of supply to BDC operators, especially the autonomous window against the direct supply by the apex bank.
He added: “I am happy the foreign reserve is going up, but it is unfortunate that the gains achieved have been reversed, although there was a kind of stemming of the volatility with some of the policies the CBN has taken. Recall that naysayers have predicted that it would have been around N3,000 to a dollar.”
Experts suggest solutions
The chief executive officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, attributed the naira crisis to supply and demand imbalance.
According to him, as long as the demand outweighs the supply, the crisis will remain.
Yusuf, a former director-general of the Lagos Chamber of Commerce and Industry (LCCI) said: “The fundamental issue is still that of demand and supply. It is more of a supply issue. Also related to that is a confidence issue because if we are not able to supply consistently, it will affect confidence, and once confidence begins to weaken, speculative demand will kick in, and that will begin to pile pressure on the system.
“That’s why it is good to have a framework because exchange rate volatility is not good for any economy. We should not leave the currency to float completely. There should be a framework to stabilise it, even if it is at N1,500. Whatever it is, let’s have a framework to stabilise it.”
“We need to build the confidence that in the next three months, this thing is not likely to change much.”
He also said Nigeria must ramp up its oil production to take advantage of the current oil price.
An economist, Dr Oluseye Ajuwon, in an interview with our correspondent yesterday, said the CBN must trace the source of the foreign currency to track any illicit inflow.
He said: “It is purely a supply and demand issue. Once demand is more than supply, the price will continue to depreciate.
“The Central Bank should start doing what it needs to do by tracing money to know where it is coming from and where it is going.
“All the interventions of the CBN amount to just treating the issue at a surface level, it is not actually addressing the real issue.”
