Naira Tumbles To N400/USD1 In Parallel Market

Forum 8 years ago

Naira Tumbles To N400/USD1 In Parallel Market

In what is becoming increasingly clearer, a cocktail of bad choices, incoherent policies made worse by instability in the markets, as well as a fastidious clinging to antiquated ideas, the fate of the Naira hangs in the balance as it continues its downward slide. This report will show why the Muhammadu Buhari administration’s misplaced belief that hope is best served for dinner, at a time when there may be no one at the table because the prognoses for the Naira and the economy, do not inspire confidence and growth.

Sustained, unmet demands during the week, forced the Naira to depreciate to a record low of N385-N400/ US$1.00 at the weekend, showing an unprecedented week-on-week decline of 13.8 per cent in the parallel market.

Central Bank of Nigeria, CBN, had intervened with supplies of the foreign currencies on Thursday at the interbank market where banks buy foreign currencies at the official rate of N197/ US$1.00,

Unfortunately, market dealers lamented that the volume supplied was too small to meet the demands presented by the banks on behalf of their customers.

They told Sunday Vanguard that the development prompted frenzied recourse to the parallel market by some dealers and their customers the next day, crashing the fragile Naira further.

The dealers are raising fears that the decline would continue in the new week as there appear to be no response to the trend yet from the monetary authorities.

One of the BDC operators and President of BDC association in Nigeria, Aminu Gwadabe, said “we have demand coming from importers while dollar supply has dried up”.

He had also told Reuters, “In my own view, the central bank should address the supply side of the market by allowing oil companies and banks to sell dollar to Bureau de Change operators as an immediate measure to reduce pressure on the Naira”.

Some financial market observers believe that the exchange crises is now complicated with malpractices spreading beyond the initial allegation of CBN that it was the BDCs that were involved in arbitraging, an allegation which was followed with a ban on their participation in the CBN foreign exchange sales at the official rate last month.

Operators believe CBN’s intervention in the inter-bank segment would not be able to stem the slide in the value of Naira in the parallel market unless the apex bank increases its volume of foreign currency sales and possibly revert to daily sales instead of once a week intervention.

This claim fuels speculations that, somehow, even the foreign currencies sold to banks by CBN find its way into the parallel market.