The naira has for the first time in several weeks made marginal recoveries at the Investors' and Exporters' (I and E) Forex window and parallel market. The modest appreciation of the local currency followed
CURRENCY speculators are in the eye of the storm. After dragging the naira to its lowest position in decades and fueling rumours of further devaluation of the local currency, the Central Bank of
The currency speculators make spurious demand for dollar with hope to make good returns from the rising gaps between official and parallel market rates. But the apex bank and
The naira on Friday appreciated to N385.94 at the Investors and Exporters (I and E) window, which was N0.56 against the dollar when compared to the N386.50 to a dollar that is traded on Thursday. At the parallel market, the naira was exchanging at N460 to the dollar after gaining N1 from N461 to a dollar it exchanged early last week. The local currency has also remained stable at the official market where it is exchanged at N360 to a dollar and has remained at that rate after marginal devaluation in March.
The marginal recoveries across different platforms and stability seen in the market came after the CBN Governor,
He predicted that they would incur losses estimated at over N 10 billion in the next few months as the CBN prepares for BDCs return to the forex market after nearly six weeks of absence due to the Coronavirus pandemic and need to protect operators.
He said with over 5,000 BDCs spread across the country receiving weekly allocations for sale to the retail end of the market, and rising accretion to the foreign reserves to over
Reopening Guidelines for BDCs
Gwadabe said
'We are also updating all regulatory obligations during the lockdown, fumigation of members offices/markets, distribution of the second phase of face mask nationwide to our members. There is also the provision of wash hand basins, sanitisers at our distributions centres while members are to explore school fees, mortgage, subscription payments as one of their allowable scopes during post-COVID-19,' he said.
He said that following the gradual easing of the COVID-19 lockdown both globally and in
Ibrahim said the planned return of BDCs to the market means fewer people will be willing to buy from the unofficial markets, and that is likely to strengthen the naira.
CBN's Message to Parallel Market Patronizers
Emefiele has warned domestic and foreign investors against patronising the unofficial market, saying it was helping to overheat that market.
Dollar sales have since resumed following a phased easing of the lockdown but foreign investor currency demand is yet to be met, analysts say.
Emefiele has warned firms and individuals against patronising the parallel market popularly called the black market.
He warned them to stop using black markets for foreign currency exchange, adding that patronising the parallel market is helping to overheat the foreign exchange market.
'I know some of you are involved, stop now. By going to the parallel market, you are helping to overheat that market. Not only that, but you will also lose money because you would have bought it at a price that is not realistic. I can tell you that you are going to lose money. But we have seen your account already. We are appealing to you, please stop and let's do what is right, what is legal, so that
Emefiele even went a step further appealing to industrialists patronising the parallel market to stop such practices in the interest of the economy and for the sustainability of their businesses, failure which they will equally, record the same huge losses like the currency speculators.
Role of BDCs in Exchange Rate Stability
Like in 2016 currency crisis, the market got a major relief after the BDCs' began getting dollar allocations from the CBN. That same scenario will soon play out as the CBN team and ABCON Management begins to count days for the BDCs return to the market.
The CBN has come to realize that BDC operators can be the difference between naira recovery and depreciation during volatile and uncertain times. That's especially true now that the local currency has come under intense pressure that is purely driven by speculative demand for the dollar. The BDCs are essentially operators that help get dollars to the end-users no matter where they are and have for decades proven time and time again their relevance in stabilizing the naira.
According to Gwadabe, with the CBN's planned lifting of a moratorium on dollar sales to BDCs, reopening of the airports for air travels, global ease on the restriction of movement are positive indications that dollar flows to the economy will soon improve.
He said: 'The return of over 5,000 BDCs to the forex market will add great strength to the Naira and lead to major capital losses for forex speculators. It happened in 2016 and will happen again in 2020. The return of the BDCs will immediately boost Naira recovery and put the enemies of the economy to shame. We are committed to the CBN's exchange rate stability and will take all necessary steps within set rules and regulations to keep the naira stable,' he assured.
Gwadabe said the return of BDCs to the forex market will help chase away speculators, curb rising inflation, boost productivity and employment, enhance price discovery, enhance market transparency and competitiveness.
Positive Indicators for Naira Recovery
Aside from positive developments in the global economy, the CBN has taken action to address the risks facing the naira, which will lead to rapid recovery for the local currency.
For instance, the recovery in the Chinese manufacturing sector and opening of the Asian tiger's economy after months of closure due to the coronavirus pandemic have raised the country's crude oil demand, many of which will be bought from
Besides,
IMF Managing Director,
Gwadabe also added that the
He said the CBN has also officially reviewed the naira exchange rate to N380 to a dollar. Aside devaluing the naira, the apex bank also adopted a unified exchange rate, and pushed the official rate of the naira to N376 to a dollar for International Money Transfer Operators rate to banks; N377 to a dollar for banks' dollar sale to CBN and pegged CBN's dollar sales to banks at N378, all aimed at attracting
Gwadabe said the naira rate review and assurances by the CBN Governor,
African Currencies' Performances
Amid huge capital flow reversal driven by risk-off sentiment, currency rates of African countries show that the South African rand is the worst hit, down 20.6 per cent year-to-date.
This is followed by the Angolan Kwanza which has depreciated by 16.1 per cent, Mauritius Rupee (-8.8 per cent), Nigerian Naira (-6.6 per cent) and
Others include the Tunisian Dinar (-3.8 per cent),
Gwadabe explained that while an adjustment of the Nigerian naira from N360/$ to N385/$ broadly reflects the 6.6 per cent weakness observed in the official market, it must be noted that currency depreciation at the unofficial market is much deeper, currently at N461/$.
But looking ahead, the outlook for the naira is expected to remain relatively strong on the back of growing foreign reserves at over
Commitment to Exchange Rate Stability
Gwadabe disclosed that
He said the CBN has been able to create a people-focused
Gwadabe said the BDCs remain at the centre of economic development and have the capacity to attract needed capital for the development of the Nigerian economy. He said that Nigerian BDCs, like their counterparts in other emerging or developing economies, have what it takes to deepen the forex market through the deployment of technology and adhering to global best practices.
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