The Naira, Nigeria’s currency, has plunged to a new low due to the severe shortage of the US Dollar in the country.
Newsflash Nigeria reports that the Naira traded at 1,190/$ at the parallel market on Friday, down from 1,100/$ two weeks ago. This means that the Naira has lost 8.2% of its value in just 14 days.
On the other hand, the Naira gained slightly on the Investor & Exporter forex window, where it closed at 808.28/$ on Friday, compared to 810.05/ on Thursday, as reported by the FMDQ.
The scarcity of the Dollar has made it hard for the Bureau de Change Operators (BDCs) to meet the demand for forex from their customers. The BDCs are licensed by the Central Bank of Nigeria (CBN) to buy and sell foreign currencies at the retail end of the forex market.
Jubril Mutiu, a BDC operator, told The PUNCH that they could not get enough Dollars to sell on Friday. He said, “The price was 1,175/$, but we don’t have it. It is not available right now.”
Another BDC operator, Adamu Afeez, said that they were looking for people who wanted to sell Dollars to them. However, he admitted that they did not have enough funds to buy them.
He said, “Without the required currency, we are unable to engage in any selling transactions.”
Ibrahim Abu, another BDC operator, said that the price of the Dollar fluctuated throughout Friday. He said, “We sold for 1,175/$ in the morning till afternoon on Friday. By 2p.m., it was already selling for 1,190/$. It has been fluctuating. I don’t know what the rate will be on Monday.”
The Naira has been depreciating since June when the CBN ordered the banks to adopt a flexible exchange rate regime. Before then, the Naira traded at 471.67/$ at the official market and 765/$ at the parallel market.
Dr Aminu Gwadabe, the President of the Association of Bureaux De Change Operators of Nigeria (ABCON), said that the only way to achieve a stable, strong, and virile exchange rate in Nigeria was to ensure that the BDCs fully participated in the retail segment of the forex market. He acknowledged the challenges facing the forex market and the Naira’s depreciation, which he said required the cooperation of all stakeholders.
He stressed that the BDCs should be fully involved in providing lasting solutions to the exchange rate volatility.
He said, “The continuous depreciation of the Naira in official and parallel markets does not benefit the BDCs and the domestic economy. Hence, steps should be taken to reverse the trend and strengthen the local currency for maximum economic impact.”
He said that the CBN had taken several measures to bridge the exchange rate gaps with genuine intentions to entrench exchange rate stability, but getting the BDCs involved in the solution recipe would bring the desired results of a highly liquid market and stable rates.
He said that illiquidity was a major concern for the BDC sector as well as other market segments.
He also expressed his displeasure with the unlicensed forex dealers who were engaging in speculative activities and tarnishing the image of the sub-sector.
