For the past three consecutive days, the Naira has consistently traded at N920/$ in the parallel market against the dollar, signaling a notable resistance within the market. An analysis of rate movements revealed that the local currency maintained this rate on Tuesday, Wednesday, and Thursday without any fluctuations.
Analysts suggest that the consistent rate observed over these three days, especially during a period marked by significant market fluctuations, signifies a reluctance among forex-end buyers to purchase at elevated rates, while sellers remain unwilling to transact at lower rates. Meanwhile, at the Investor and Exporter (I&E) Window, the naira concluded at N762/$, resulting in a notable N158/$ premium compared to the official exchange rate in the parallel market.
Exchange trader highlights crisis within the money market
According to Garuba Sarki, a Bureaux De Change (BDC) trader operating in Marina, central Lagos, forex speculators have been unsuccessful in driving exchange rates beyond their current level. He said “I think the rate is at a resistance level in the market. No one wants to pay more than N920/$ and no one wants to sell below that rate. The ensuing crisis in the market is due to inadequate or zero dollar supply and an uptick of demand from multiple buyers.”
Sarki emphasized that facilitating funding for BDCs or encouraging banks to provide dollars to retail end buyers could significantly bolster dollar liquidity and result in substantial benefits for the Naira. He pointed out that currently, banks are not actively selling dollars, and BDCs are facing limitations. This situation poses a challenge to the availability of dollar liquidity.
Moving further, he urged the Central Bank of Nigeria (CBN) to take swift measures to reverse the prevailing trend and restore order in the market. Sarki also noted that the increasing demand from companies sourcing dollars for Christmas sales and individuals planning summer holidays has added further strain to the forex market.
CIBN’s former registrar’s advice on naira to dollar relationship
Dr. Uju Ogubunka, the former Registrar of the Chartered Institute of Bankers of Nigeria (CIBN), has urged economic policymakers to address the naira to dollar relationship directly and establish a foundation for exchange rate stability while fortifying foreign reserves. In addition, he provided counsel to Folashodun Shonubi, the Acting Governor of the CBN, to address the instability within the forex market.
He said “It is not difficult to find what he should. Naira to dollar relationship is at its worst state, at least let’s get to where we were before and from there, move further forward. He needs to create jobs, and reserves which relate to the exchange rate should be boosted. He also needs to improve export and reduce import.”
ABCON president’s statement on the forex market
Dr. Aminu Gwadabe, the President of the Association of Bureaux De Change Operators of Nigeria (ABCON), has recommended that the Federal Government improve financial intelligence efforts to monitor individuals involved in corrupt activities, thereby purging the market of their influence. He highlighted that individuals with ill-gotten gains are the ones exerting pressure on the forex market through manipulative tactics, and he asserted that the depreciation of the Naira is a result of their collective impact rather than conventional supply and demand forces.
CBN’s recent policy reforms
In June, the CBN initiated a series of currency reforms aimed at unifying the exchange rate and eliminating multiple exchange rates. These reforms resulted in a significant 40% reduction in the official Naira exchange rate. However, a persistent challenge has been the availability of sufficient dollar supply, which has hindered the convergence of both official and parallel market rates.
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