Naira now 230 to a dollar

Firstclass newsline gathered that these are definitely not interesting
times for the nation's economy, particularly the national currency,
the naira, no thanks to the depleting reserves and the subsequent
banning of importers of 41 items from the foreign exchange market by
the Central Bank of Nigeria.
Barely 10 days after the CBN stopped forex sale to importers of rice,
textile and 39 other items, the naira on Wednesday crashed 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 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.
"The situation is getting critical now. There is serious dollar
liquidity squeeze in the market now. The demand is overwhelming and
both the black market and the BDC segment can no longer meet the
demand," a black market operator told our correspondent on Wednesday.
"The market is very volatile now as a result of the restrictions
placed on about 41 items by the central bank. Most importers are now
patronising the parallel market to source their dollars," the head of
a BDC, Mr. Harrison Owoh, told Reuters on Wednesday,.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.
In the letter, a copy of which was obtained by our correspondent, 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 told our correspondent that it was expedient for the CBN to
increase its forex sale to the BDCs in order to stabilise the naira.
Some analysts believe the naira may hit 240 against the dollar in the
coming days.
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.
In a new circular dated July 1, 2015, the CBN also warned banks not to
sell forex to the importers of the 41 items that were banned from the
forex market last week.
Firstclassnewsline.net