The Central Bank of Nigeria (CBN) is expected to shut the official foreign exchange (forex) window for the year by Wednesday and pump $90 million into the parallel market, it was learnt yesterday.
This week’s parallel market intervention is expected to curb prevailing naira volatility in the market. The naira last week exchanged at N280 to a dollar after the CBN supplied only $23 million to Bureaux De Change (BDC) operators, $67 million short of the expected $90 million.
Association of Bureaux De Change Operators of Nigeria (ABCON) President Aminu Gwadabe, who said he had heard about the plan, said the apex bank will meet this week’s forex demand to avoid a repeat of last week’s crisis.
“I think the CBN has learnt its lessons and will supply $90 million to the market. This translates to $30,000 for each of the 3,000 BDCs. That is the only way the naira will begin to rebound in the parallel market. It is currently exchanging at N263 to one dollar in Lagos and Abuja,” he said.
The parallel or black market has been sustained by the significant differences in the naira exchange rates against international currencies. With nearly N70 gap between the official and the parallel market rates, there has been a lot of room for players to make easy profit.
Though primarily funded by travellers and Nigerians living abroad who remit funds home, many banks have profited illegally by selling forex obtained through official sources to the black market through a process known as round tripping.
Gwadabe also said the high level of forex volatility recorded in the parallel market last week, was fuelled by the inconclusiveness of the CBN’s plans to permanently stop supplying dollar to the BDCs.
He disclosed that the market volatility was also worsened by banks recalling loans given to forex speculators as the year gradually runs to an end.
He attributed the naira rebound to people who kept large volume of dollars, but rushed to take advantage of high prices. It is estimated that about $5 billion are held by people waiting to take advantage of price changes.
CBN Director, Monetary Policy Department, Moses Tule, said the naira was under pressure because of the actions of speculators.
He said currency speculators are taking positions on the naira, with a view to making excess gain from currency trading.
Tule said currency speculators were determined to put severe pressure on the monetary authorities and make the apex bank buckle and further devalue the naira.
According to him, the CBN would not fold its arms while economic predators feast on the nation’s commonwealth through arbitrage.
While maintaining that the only rate in the currency market is N196.47 to dollar, he wondered why indigenous operators in the Bureau de Change (BDC) segment of the market chose to make huge profits at the expense of customers in genuine need of the currency.
Tule lamented that while international operators, such as Travelex, traded at not more than N7 above the rate, indigenous operators preferred to make excessive profits.
“We know what the fundamentals of the economy are and we will continue to take the right economic decisions on what to do and not when people sitting out there speculating on the currency think the naira should be devalued, so that they could make profit out of it,” he said.
“No country quotes its exchange rate with reference to the BDCs rates. The currency has a reference rate and that is the interbank exchange rate,” he said.
Tule urged Nigerians to be more patriotic in their dealings rather than engage in activities capable of undermining the integrity and value of the naira, adding that the media had a role to play in assisting the CBN to curb speculation on the naira.
