CBN new rule drops naira to 230

Less than two weeks after the Central Bank of Nigeria (CBN) stopped the sale of forex to some category of importers, the nation’s currency, naira, on Wednesday dropped to 230 against the United States’ dollar at the parallel market, down from 218 recorded on June 23 when the new forex rule was introduced.

The CBN new policy had stopped forex sale to importers of rice, textile and 39 other items.

The policy, which has pushed huge forex demand from the interbank (official) market to the parallel (black) market and the Bureau de Change retail segment, has led to artificial scarcity of dollar and other major foreign currencies as operators now hoard them in anticipation of higher prices.

The naira had fallen to 220, 223, 226.5 and 228 against the dollar in the past one week.

Black market and BDC operators, however, told our correspondent that serious dollar liquidity squeeze was already hitting the market and operators were no longer in possession of huge stock of forex to meet rising demands, especially from the importers of the banned items.

Using the CBN figures, analysts had estimated that about $5.7bn quarterly forex demand was being transferred from the official interbank market to the black market.

Meanwhile, the Association of Bureau De Change Operators has written to the CBN asking it to intervene in the dollar scarcity in the parallel market and the BDC segment to save the naira from crashing further.

Read Also: No more forex for rice, private jets -CBN

In the letter, the association expressed its readiness to work with the CBN to stabilise the market.

The letter, signed by association’s President, Alhaji Aminu Gwadabe, and Executive Secretary, Uduma Cletus, advised the CBN to increase its weekly forex sale to the BDCs from $30,000 to $50,000.

The body also asked the central bank to reintroduce the autonomous market where it could sell about $100,000 to the operators.

Gwadabe stated that it was expedient for the CBN to increase its forex sale to the BDCs in order to stabilise the naira.

However, the naira traded at 198.95 to the dollar at the interbank market on Wednesday, according to Reuters.

The central bank had lowered its exchange rate peg to N196.95 to the dollar on Tuesday from N196.90 last week

Also, a trade of $735.74m went through on Nigeria’s interbank currency market at N198.45 on Wednesday, Thomson Reuters data showed.

Market sources said a foreign client had sold dollars to a bank in Nigeria. Total interbank market volumes stood at $1.12bn on Wednesday, far higher than typical trading sessions since the central bank introduced a naira peg in February.

Meanwhile, the CBN has reminded dealers and banks that their dollar cash sale for six items, including schools fees, insurance premium, basic travel allowance and monthly mortgage should not exceed $5,000.

You may also like: CBN to sanction Forex dealers

Ripples… without borders, without fears

Join the conversation

Opinions

Support Ripples Nigeria, hold up solutions journalism

Balanced, fearless journalism driven by data comes at huge financial costs.

As a media platform, we hold leadership accountable and will not trade the right to press freedom and free speech for a piece of cake.

If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.

Your support would help to ensure that citizens and institutions continue to have free access to credible and reliable information for societal development.

Donate Now