February 17, 2016/Punch

The acute scarcity of foreign exchange, especially the United States dollar, made the naira to fall further on Tuesday to 252 against the greenback at the parallel market.

The increasing pressure on the naira is caused by high demand for the dollar by importers and speculators, foreign exchange dealers said.

The local currency had weakened to 345 at the parallel market on Monday, having hit 338 last Friday as importers scrambled for the dollar to meet overseas obligations

The central bank has left its official rate unchanged at N197 to the dollar on its interbank window.

“Most individuals who sell (dollars) to us are no longer willing, but demand is piling up,” the acting President, Association of Bureau De Change Operators, Aminu Gwadabe, told Reuters on Tuesday.

Last month, the Central Bank of Nigeria banned dollar sales to BDC operators, sending the naira to record lows at the black market, and later stopped daily sales to the interbank market, in an effort to conserve the external reserves, now at their lowest in more than 11 years.

The nation earns around 90 per cent of its foreign exchange earnings from crude oil exports. The foreign exchange reserves fell to $27.83bn as of February 12, data from the CBN website showed.

Some retail currency operators have few dollars in their vaults and depend on other members to fill orders when they have excess demand, fuelling the weakness in the currency, Reuters reported quoting forex traders.

The naira has depreciated by over 13 per cent in less than two weeks.

The currency hit a then record low of 338 against the greenback on Friday, a day after the Bankers’ Committee announced that it might stop providing foreign exchange for school fees and medical bills payment.

The naira, which has been on a free fall in the past few weeks, depreciated steadily from 310 last week Monday to 335 on Thursday at the parallel market.

“The current naira-dollar exchange rate is artificial; it is as a result of the negative perception about the naira and the fear that it may be devalued,” Gwadabe said.

President Muhammadu Buhari is concerned that further depreciation will hurt poor Nigerians, but the CBN’s refusal to revise the pegged exchange rate has widened a chasm between official rate and the parallel market.

The Chief Executive Officer, Economic Associates, Dr. Ayo Teriba, said there were several ways the Federal Government could attract forex into the country to stabilise the naira, stressing that the currency needed not be allowed to depreciate to the current level.

Teriba said, “Saudi Arabia has started attracting foreign investments. The country opened an Initial Public Offer that banks were falling on one another to buy. Nigeria seems not to be doing something. I don’t think that Nigeria needs to allow the naira to be this weak; we are not helpless, we can do something.

“This is 2016 and not 1986, 1992 or 1995; the conditions are not the same. The global environment has liquidity now that Nigeria can attract. The situation is not like 1986 when the global environment was tight.

“Nigeria has investment opportunities; we have the largest population in Africa, we are the biggest oil exporter in Africa. I have told you that I don’t think that we need to borrow to build infrastructure. We can open critical sectors like rail and power, among others, and you will see the huge forex that will come into the country.”

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February 15, 2016/Reuters

Nigeria’s naira weakened to a record 345 to the dollar on the parallel market on Monday, increasing pressure on the government to devalue the official exchange rate to narrow the gap and spare Nigerians from huge bills for imported goods.

The local currency eased 1.47 percent from Friday’s close of 340 to the dollar, while the official rate remained at 197.50 to the dollar at the close of trading on Monday.

Traders said the black market rate had slipped as Nigerians with school and medical bills to pay abroad anticipated the central bank would stop allocating currency for such payments. The bank has not denied or confirmed any such plans.

Tumbling global oil prices have battered Africa’s top crude exporter, with foreign exchange reserves down to an 11-year low at $27.85 billion by Feb. 11.

Nigeria’s government is concerned that further depreciation will hurt poor Nigerians, but the bank’s refusal to revise the pegged exchange rate has widened a chasm between official rates and the parallel market.

“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,” said Aminu Gwadabe, head of the Association of Bureau de Change Operators of Nigeria.

Last month, Nigeria’s central bank halted dollar sales to non-bank foreign exchange operators and allowed commercial banks to accept dollar deposits, in a failed effort to shore up dwindling foreign reserves.

Nigeria earns around 90 percent of its foreign exchange earnings from crude oil exports, but mismanagement of its refineries means it must also import expensive refined fuel, eating deep into its reserves.

(Reporting by Oludare Mayowa, editing by Tom Miles)

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February 15, 2016

The naira will weaken further at the parallel market this week after shedding nine per cent of its value last week, foreign exchange dealers and economic experts have said.

Last week, the local currency fell from 310 to 338 as acute shortage of the greenback lingered.

The CBN has left the official exchange rate unchanged at N197 to the dollar on its official interbank window.

Forex dealers and experts expect the naira to fall further at the parallel market this week as demand for the greenback continues to soar.

“The situation has got to the point of hysteria now; everybody wants to hold dollars. So the demand is rising and piling up,” the Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said.

The local currency hit a record low of 338 to the dollar on Thursday as desperate importers scrambled for dollars to meet their obligations overseas.

The local currency had closed at 325, 318, 313.5 and 310 on Thursday, Wednesday, Tuesday and Monday, respectively.

“We see the naira falling further in coming days if the central bank fails to lift the dollar restriction,” the Acting President, Association of Bureau De Change Operators, Aminu Gwadabe, said.

Tumbling global oil prices have battered Nigeria’s oil-dependent economy, with external reserves down to an 11-year low at $27.89bn on February 9, Reuters reported.

President Muhammadu Buhari is concerned that further depreciation will hurt poor Nigerians, but the CBN’s refusal to revise the pegged exchange rate has widened a chasm between official rate and the parallel market.

In January, the central bank halted dollar sales to the BDC operators and allowed commercial banks to accept dollar deposits, in a failed effort to shore up dwindling foreign reserves.

Around 90 per cent of the nation’s foreign exchange earnings come from crude oil exports, but mismanagement of the refineries means the country must also import expensive refined fuel.

The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said it was high time the CBN came up with a forex policy to address the forex crisis confronting the nation.

In an economic note released on Thursday, Rewane said, “Nigerians are perplexed at the endless slide of their currency, which is now trading at the lowest points ever.

“This is happening even when the oil price is up at $31pb. The debate as whether to devalue the naira is not the real issue. The discourse should be whether we need an exchange rate policy or not. The absence of a policy is a recipe for economic anarchy and a race to the bottom.”

According to Chukwu of Cowry Asset, the CBN needs to address the forex crisis before it gets too late.

The Head, Investment Advisory, Afrinvest West Africa Limited, Mr. Ayodeji Ebo, believes the CBN needs to review the list of the 41 items it banned from the official forex market, saying “some of the items need to return to the official forex market to reduce the pressure at the parallel market.”

Culled—–Punch

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