Posted on: 11:18 Thu, 09 Jun 2016



The continuing pressure on the
naira rose sharply on Wednesday
with the local currency tumbling to
a new low of 371 against the United
States dollar at the parallel market.
It had closed at 361 per dollar on
Tuesday.

The delay by the Central Bank of
Nigeria in explaining how the
proposed flexible exchange policy
will work has increased speculation
on the currency.

Foreign exchange dealers and
investors said the delay had caused
uncertainty in the foreign exchange
market and fuelled hoarding of
hard currencies.

According to foreign exchange
dealers at black markets in Lagos,
Abuja and major airports across the
country, the dollar was sold for
between 367 and 373 on
Wednesday.

Findings from various operators
revealed that the local currency
went for 371 against the greenback
in most of the parallel market
locations.

Abokifx.com, an online portal that
monitors the movement of
exchange rates at the parallel
market, reported that the naira
closed at 367 against the dollar.

However, the currency traded at
199.40 to the dollar on the official
interbank market, within the CBN’s
pegged rate band.

“Demand for the greenback has
increased amidst growing scarcity
as uncertainties created by the new
policy have caused individuals to
start to stock dollars,” the National
President, Association of Bureau De
Change Operators, Alhaji Aminu
Gwadabe, told Reuters on
Wednesday.

Economic analysts said heightened
political risks, evolving economic
crisis and the CBN’s delay in
unveiling its blueprint on the
proposed forex policy were
responsible for the fast
depreciating rate of the naira at
the parallel market.

An economic analyst and Chief
Executive Officer of Cowry Asset
Management Limited, Mr. Johnson
Chukwu, said, “Foreign investors
are fast losing confidence in the
economy, seeing that they cannot
bank on what the central bank
says. It is almost two weeks now
since the announcement of a new
policy and yet, the blueprint has
not been unveiled.

“Secondly, the Minister of State for
Petroleum Resources, Dr. Ibe
Kachikwu, just said that oil
production had fallen significantly
as a result of the disruption in the
Niger Delta; this means a major
drop in our forex earnings. So, this
is an evolving economic crisis.”

Other analysts said the value of the
local currency was dipping because
customers were trying to hedge
against a possible depreciation
when the CBN clarifies its new
forex policy.

The naira had closed at 357 against
the greenback on Monday, before
crashing to 361 on Tuesday.

The CBN had recently said it would
abandon its naira peg to the dollar
and introduce a flexible currency
exchange regime.

It has not said how this will work, a
situation that has unsettled
investors who are worried about
getting caught in the middle of a
devaluation.

The CBN’s Monetary Policy
Committee had two weeks ago
announced the plan to adopt a
flexible exchange rate. The
Governor, CBN, Mr. Godwin
Emefiele, said the blueprint for the
proposed policy would be released
soon.

The delay has, however, caused the
stock market to record huge losses
after recording landmark gains
following the announcement of the
plan to adopt the policy.

The central bank banned dollar
sales to retail Bureaux De Change
in January and reduced supply at
its official interbank forex market
in an effort to conserve reserves,
now at their lowest level.