Nigeria’s naira appreciates to N430/$ on parallel market
By Samuel Bankole
Nigeria’s naira currency strengthened against the dollar on the parallel market on Tuesday to N430 to the greenback from N445 per dollar the previous day, traders said.
The rapid gain in the local currency was linked to the recent announcement by the Central Bank of Nigeria (CBN) to resume dollar sales to bureau de change operators from September 7.
“The pronouncement of the resumption of (dollar) sales to bdcs is the policy that broke the camel back,” President of the Bureau de Change Association of Nigeria, Aminu Gwadabe told Global Financial Digest.
“The CBN – Central Bank of Nigeria – peg of bdcs selling rates to #386/$ is a benchmark for a unified exchange rate.
“And hoarders and speculators have to operate within that band and the reason for the offloading of foreign currencies in the market,” Gwadabe said.
On Thursday, the regulatory bank announced the resumption of dollar sales to the dollar retail outlets effective from September 7, 2020.
The CBN announced new exchange rate that it will sell dollars to bureau de change in another circular where it said International Money Transfer Operators (IMTOs) will sell dollars to banks at N382 to the dollar, while banks will sell currency at N383 a dollar to the CBN and in turn, the apex bank will sell to the bureau de change operators at N384 per dollar.
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The regulatory bank said the volume of dollar sales should be $10,000 per BDC while the exchange rate for the British pound sterling should be derived from the dollar cross rate on the date of sale.
The naira had continued to depreciate on the black market since March when the CBN suspended dollar sales to the Bureau de change in the wake of the outbreak of coronavirus pandemic and the lockdown imposed to contain the spread of the disease.
The CBN has devalued the naira twice this year, first in March and the second in July in its bid to ensure rate convergence at all segments of the domestic foreign exchange market.
In spite of the move, the exchange rate of the naira has remained sustained a rapid downward trend on the parallel market and breached the band set at the investors and exporters (I&E) window.
Demand for hard currency has built up, especially from offshore portfolio investors that want to move out their funds from the country after they sell down the positions in the debt and equity market.
Also, some individuals trying to hedge against further loss have mounted on the available dollars in the market, with the naira depreciating further.
At the parallel market on Tuesday, the Pound Sterling traded at N610 to a pound while the Euro traded at N530, traders said.
With the high expectations of improvement in dollar liquidity in the bureau de change segment from September 7, it is doubtful if the $10,000 promised by the CBN to each operator could support the pent up demand in the market.