… ABCON President Gwadabe blames speculators
By Oludare Mayowa
Nigeria’s naira currency depreciated to a record low of N955 to the dollar on the parallel market on Thursday, from N920 per dollar on Wednesday, as demand pressure mounted.
The domestic currency, however, gained on the official Investors and Exchange (I&E) window to N781.34 to the dollar against N782 it closed the previous day, according to data from the FMDQ.
According to sources, demand from speculators and those who hedged against the local currency pushed the value of the local currency lower on the parallel market.
With the closing rate on Thursday, the gap between the official and parallel markets has further widened to N180 per dollar, creating room for arbitrage.
President of the Bureau de Change Association of Nigeria (ABCON), Aminu Gwadabe, said what the market witnessed on Wednesday was illegal economic behavior and a speculative attack on the local currency.
According to him, “There is nothing fundamental to suggest that the Bull run on the naira is realistic.”
Gwadab, who spoke with Global Financial Digest, acknowledged that there is a persistent liquidity crunch in the market, which was induced by a lack of public confidence in the market, creating panic demand.
“We are also witnessing pent-up demand from the hedging activities of oil marketers.
The ABCON chief said the naira closed firmer at the bureau de change window to N940 to the dollar at the close of transactions on Wednesday as positive sentiments returned to the market.
“We expect clear statements from the apex bank to ensure stability in the market.
“I believed as soon as the management of the apex bank moves to undermine the activities of illegal economic behaviors, the naira will discover its true market price, which is around N700 or N750 to the dollar, “Gwadabe said.
In June, the Central Bank of Nigeria (CBN) announced the unification of the multiple foreign exchange markets, leading to the depreciation of the naira by a third, which has since fluctuated within the range of the official window.
The country has faced dollar shortages after foreign investors exited local assets in the wake of previously low oil prices. Since then, investors have yet to return, and the central bank has not yet settled outstanding demand for dollars from foreign investors seeking to repatriate funds and airlines seeking to send money from ticket sales abroad.
As a result of the shortages, some businesses and individuals have turned to the unofficial parallel market, where the currency is trading weaker, thereby widening the gap with the official rate.
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