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Nigeria’s naira weakens further to N522 to dollar on parallel market

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...Naira declines 3.57% since CBN decision on BDCs

By Oludare Mayowa

Nigeria’s naira weakend further to N522 to the dollar on Wednesday from N520 it closed at the parallel market on Tuesday shortly after the Central Bank of Nigeria (CBN) announced that it will stop dollar sales to Bureau de Change operators.

The local currency has declined by 3.57 percent against the greenback since the CBN announced the suspension of dollar sales to BDCs.

Sources said many traders decided to hoard dollar with the hope that the exchange rate would decline further as greenback becomes scarce in the market, putting pressure on the available hard currency.

The naira had traded at N504 per naira prior to the announcement of the forex sales suspension by the CBN Governor Godwin Emefiele after the Monetary Policy Committee (MPC) meeting in Abuja.

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Mike Obadan, a professor and member of the MPC said on Wednesday that he expects the exchange rate to go up on the back of the CBN announcement, but noted that this will be in the short term.

“The exchange rate will temporarily going up, but after sometime, the rate wil calmed down.

“It may going up because some desperate economic agents may still want to go there and buy forex at whatever cost because of their motive which may not be pure,” Obadan said on NTA Good Morning Nigeria programme.

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However, a trader said the decision of the CBN to tranfer the function of the BDCs to banks will not solve the problem created by the regulatory bank itself.

According to the trader, the challenge in the system is because of the dollar shortage and the inability of the central bank to take the right decision at the right time to save the naira.

Analysts at the United Capital expressed concerns on the decision of the Central Bank of Nigeria (CBN) to stop dollar sales to the Bureau de Change operators.

“…while we think the policy decision is not necessarily bad, we are concerned about the ability of the CBN to sustain stability in the official windows as depleted reserves and pressured inflows remain significant concerns.

“Thus, as we expect the CBN to remain incapacitated in meeting the economy’s huge FX demand, we think this policy portends additional FX woes for market participants, as we anticipate a kneejerk reaction, which would lead to a steep depreciation of the Naira in the parallel market,” United Capital wrote in a note to clients on Wednesday.

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