The Naira experienced further depreciation in both the parallel and official exchange markets yesterday due to ongoing issues of speculation and hoarding. This downturn in value continues despite efforts by the Central Bank of Nigeria (CBN) to stabilize the currency through its interventions in the forex market.
As reported by Vanguard, the Naira's value declined to N1,435 per dollar in the parallel market, a decrease from N1,415 per dollar the previous day. Similarly, in the Nigerian Foreign Exchange Market (NAFEM), the Naira fell to N1,421.06 per dollar from N1,416.57, reflecting a depreciation of N4.49.
The disparity between the parallel market and NAFEM rates has also widened significantly, now standing at N13.94 per dollar compared to just N1.57 the day before.
Challenges with Dollar Sales to Bureaux De Change (BDCs)
In February, the CBN resumed selling dollars to BDCs as part of its strategy to influence the retail segment of the forex market. Despite these efforts, many BDC operators have voiced frustrations over the slow pace and inefficiency of dollar disbursements by the CBN, noting delays of three to four weeks from payment to receipt of dollars.
The last round of dollar sales offered $10,000 per BDC at a maximum margin of 1.5 percent. However, the slow disbursement has led to several BDCs requesting refunds for their Naira payments, citing delays and operational challenges.
Market Speculation and Hoarding
The forex market has seen a resurgence of speculation and hoarding practices in the past few weeks, fueled by the continuous depreciation of the Naira. A BDC operator, speaking to Vanguard on the condition of anonymity, explained that the uncertainty around the frequency and volume of CBN's interventions has encouraged such behaviors. Many are purchasing and withholding dollars, anticipating further increases in rates.
"Before, when people were scared, they would sell their dollars. But now, no one is doing that. There’s no supply coming into the market," the operator said.
CBN's Response
Efforts to get comments from the CBN were unsuccessful as Mrs. Hakama Sidi-Ali, the Director of Corporate Communication, did not respond to inquiries from Vanguard.
This ongoing instability in the forex market highlights significant challenges in managing currency value and ensuring smooth operation within the financial sector. The situation has not only impacted BDCs but also the broader economic landscape, contributing to uncertainty among investors and everyday citizens alike.
0 Comments