The Central Bank of Nigeria (CBN) has said that it would not bow to pressures to further devalue the local currency amid consistent slide of naira against the US Dollar at the exchange market.
The parallel market segment of the foreign exchange market traded one US dollar to N245 after it opened the day at N242/USD1.00. The exchange rate on Tuesday was N240 and N238 on Monday.
Dealers in the parallel markets expressed fears that at the on-going speed of slide the exchange rate might hit the N250/USD1.00 low by next week.
But reacting to the development, CBN’s Director of Corporate Communications, Mr Ibrahim Muazu, said that there was no need for panic at the development, adding that it could be just a temporal reaction to the policy change.
While defending the recent foreign exchange measures taken by the apex bank to shore up the dwindling foreign reserves, Muazu said the apex bank would not be pressured into further devaluation of the local currency, which he said was the intent of some sections of the foreign communities.
He stated the parallel market cannot trigger any economic crisis since all major foreign exchange demands for eligible
imports go through the official exchange market which has not only remained stable but has been fully supplied by the apex bank so far.
Bureau de Change (BDC) operators said huge demand for foreign exchange began to inundate them as well as the black market as a result of the CBN’s shut off of 41 items from the official market three weeks ago.
Muazu said by CBN findings, the supply/demand gap being experienced in the parallel market was as a result of supply shortages in that segment following the plugging of loopholes from the official markets that had hitherto leaked into parallel market through round tripping.
He also said other economic crimes such as money laundering were major drivers of what is happening in the parallel market today.
President of BDC Operators of Nigeria, Aminu Gwadabe, had given reasons for the steady decline in value of Naira in the parallel market to include “over regulation of the bureau de change and financial markets, increased naira liquidity chasing fewer dollars, intensified hoarding and speculative activities, inability of banks to meet legible and legitimate demands and tightening policies of CBN.”
However, our correspondent’s interactions with some of the parallel market dealers, had indicated that most of them have been driven by speculations that the country was cash strapped in foreign currency, hence they are hiking the exchange rate on fears of long term real scarcity.
On the other hand, some speculators are taking positions against possible devaluation in the face of continued pressure on the apex bank from both within and outside the country.