Naira Crashes To 300 Against Dollar

Monday’s stoppage of foreign exchange sales to Bureau De Change operators by the Central Bank of Nigeria failed to lift the naira on Tuesday as the currency exchanged for 300 against the United States dollar in Kano, 290 in Lagos and 292 in Abuja.

Financial experts said the naira would
decline further, while private sector
operators described the move as a
welcome development.
The ban was announced on Monday,
when naira trading at 285 against the
dollar at the parallel market from 278
on Friday.
The Acting President, Association of
Bureau De Change Operators, Alhaji
Aminu Gwadabe, told one of
correspondents in a telephone
interview that the currency traded
against the greenback at 300, 290 and
292 in Kano, Lagos and Abuja a day
after the CBN announcement.
“There is cut of (dollar) supply to the
market. The BDC sub-sector has been
murdered. We are not coping. The
naira is going to head northwards.
There is no solution in sight,”
Gwadabe lamented.
The Head of Investment Research,
Afrinvest West Africa Limited, Mr.
Ayodeji Ebo, said the stoppage of forex
sale to the BDCs meant that the CBN
wanted everybody to apply to the
banks for dollars.
He stated, “But we feel the pressure
now will move from the BDCs to the
parallel market. We will see significant
spike in the value of the naira at the
parallel market because the little
supply to the BDCs have also helped to
cushion the demand at the parallel
market.
“It will further compound or increase
the spread between the parallel market
and the interbank market. So, it will
also increase round-tripping and
unethical practices within the financial
system.”
On the lifting of the ban on cash
deposits into domiciliary accounts, Ebo
said, “I am still sceptical about how this
will work except they are also assuring
us that if you deposit it, you can
consummate business with it.”
A professor of financial economics at
the University of Uyo, Akwa Ibom
State, Leo Ukpong, said, “I don’t think
the stoppage of dollar sale to the BDCs
will solve the problem. The currency
will depreciate some more.
“This move will make the naira to
weaken more as demand for dollar
will skyrocket because of the short
supply.”
Members of the organised private
sector, however, applauded the CBN
for the stopping the sale of dollars to
the BDCs and lifting the ban on cash
deposits into domiciliary accounts.
The President, Manufacturers
Association of Nigeria, Dr. Frank
Jacobs, said industrialists had earlier
kicked against the funding of the BDCs
by the central bank, adding that with
the development, the forex could be
channelled towards funding the real
sector in terms of importation of raw
materials.
On the removal of the restriction of
cash deposits into domiciliary accounts,
Jacobs said manufacturers were still
waiting for more clarification as to how
the money deposited could be utilised
by the customers.
The Director-General, the Nigerian
Association of Chambers of Commerce,
Industry, Mines and Agriculture, Mr.
Emmanuel Cobham, said the forex sale
ban was a welcome development.
According to him, although the BDCs
are necessary in the economy, they are
licensed entities and should, therefore,
source for their own funds.
Also speaking on the matter, the
Director-General, Lagos Chamber of
Commerce and Industry, Mr. Muda
Yusuf, lauded the forex policy review,
noting that it had addressed the
concerns of economic operators.
According to him, it is a source of
worry that the CBN continues to
maintain its official exchange rate at
N199 to the dollar at a time of
dwindling forex inflow.
“The pressure on the official window
will persist. The risk of round-
tripping and distortions in the foreign
exchange market will consequently
remain high,” he said.