The naira lost more strength at the foreign exchange (forex) markets at the weekend as the nation’s forex reserves deprecated to its lowest level in a year.
Nigeria’s forex reserves for the sixth consecutive week to close weekend at $37.91 billion, implying a drop of $165.7 million during the week.
The continuing decline in forex reserves further heightened the currency crisis with a backlog of unmet forex demand.
At the official market, the naira depreciated by 0.5 per cent to N441.38 per dollar as turnover at the Central Bank of Nigeria (CBN)’s managed Investors & Exporters (I &E) Window declined by about 22 per cent.
At the parallel market, where majority of independent users source forex, the naira declined by 1.1 per cent to a new low of N743.00 per dollar.
Most analysts at the weekend said there were no respites for the naira in the period ahead citing the country’s compounded macroeconomic risks.
Analysts at Cordro Capital faulted the apex bank’s forex management as unsustainable, noting there could be further depreciation of the naira to bridge the gap between the official and parallel markets.
The gulf between the two rates stood at N301.62 as of the last count.
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Other analysts at Cowry Asset Management said they expected further depreciation of the local currency s the politicking gathers momentum.
“As we draw closer to the election year and with the campaign activities by political parties taking full gear already, it is expected that the demand for the greenback will buoy further weakening of the legal tender,” Cowry Asset stated.
President, Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadabe, described the apex bank’s forex policy as “unorthodox” and warned that it would continue to negatively affect the naira.
Gwadabe, who spoke in a chat with financial journalists in Lagos at the weekend, explained that the selling of forex earnings at a fixed rate significantly below open market rate is unorthodox practice that lacks credibility and transparency.
“That singular act encourages rent seeking, currency substitution that continues to hurt real sector operators and the overall economy,” Gwadabe said.
He recalled that when the apex bank decided to suspend sales of forex to Bureau De Change (BDCs), in July 2021, the open market rate was about N501 per dollar.
More than a year after, the naira to the dollar has depreciated, with many Nigerians not meeting their invisible transactions needs and the regulator not showing much commitment to meeting those needs.
Gwadabe, said the small retail exchange institutions – BDCs – remain at the centre of CBN’s exchange rate policies implementation, hence the need for the regulator and public to continuously support BDCs’ roles in exchange rate stability.
This, he added, can be achieved through increased automation of their processes and providing more channels of transactions for sustainable price equilibrium while eradicating rent seeking, currency substitution and speculation.
“I am very confident that Nigeria will in not too distant future appreciate a stable exchange rate and availability of forex in the local economy as the right people for government policies’ implementation get such responsibility,” Gwadabe said.