The Nigerian naira strengthened to N744/$ at the Investors and Exporters (I&E) window, the official market segment, on Monday. This was a significant improvement from Friday’s closing rate of N768.
However, the naira remained weak at the parallel market, where it traded at N790/,creating a wide gap of N46/ between the two market segments.
According to market reports, the low closing rate at the I&E window on Friday attracted forex buyers who wanted to take advantage of the cheap dollars available at that market.
The I&E window is where the Central Bank of Nigeria (CBN) has unified all exchange rates and allowed market forces to determine the value of the naira.
The president of the Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, expressed concerns about the growing disparity between the official and parallel market rates.
He urged the CBN to find ways to narrow the gap, such as including bureaux de change operators in the forex market operations.
He also advised the CBN to ensure liquidity in the retail end of the market by de-monopolizing diaspora remittances and collaborating more with BDCs, which control the retail segment of the forex market.
Some market analysts from FutureView Securities said that the hopes for forex unification were also hampered by the CBN’s policy of restricting 43 items from accessing forex at the official market. The policy, which was introduced in June 2015, was meant to conserve foreign exchange resources and encourage local production.
On his part, a former executive director of Keystone Bank Limited, Richard Obire, said that one of the main attractions of the parallel market was its ease of access and minimal documentation requirement. He said that some buyers and sellers preferred this feature over the formal market.
He added that when supply increased sufficiently to bring down forex prices to a stable range, more people would move to the formal segment of the market. He said that buyers would then place less value on the “no documentation” feature of the parallel market and see more attraction in the better price they could get in the official market.
