After recording huge losses in naira and foreign currencies, currency speculators seem to have been chased out of the country’s foreign exchange (forex) market, The Nation has learnt.
Confirming the development, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said with rate convergence at both the bureau de change (BDC) and parallel markets, and transaction margins narrowed to N2 in most cases, the market seems unattractive to speculative dealers.
The speculators had lost over N700 million in March, as the Central Bank of Nigeria (CBN) sustained its dollar interventions in the interbank market. The losses grew to over N1 billion in April, after the Investors’ & Exprters’ Forex Window was opened to deepen dollar liquidity in the economy.
Gwadabe said speculators lost billions of naira in the past, with their businesses badly hit when the CBN achieved exchange rate convergence.
According to him, forex demands in the market are genuine, and over 3,000 bureaux de change operators have continued to make their twice-weekly dollar bids at the CBN to boost liquidity.
“We are happy that the forex demands in the market are becoming genuine. Speculators can no longer survive the current stability in the market and that is good for the economy and the naira,” he said.
Gwadabe defended the operations of BDCs, saying they have contributed significantly to the current exchange rate stability being witnessed in the country.
He disclosed that in India, the BDCs generate over $30 billion from the Diaspora remittances. Besides, in the United Arab Emirates, the entire needs of banks are met by the BDCs. The working of the Lebanese economy is highly dependent on the activities of BDCs in that country. He urged the managers of the economy to continue their support for BDC operators.
The CBN Corporate Communications Department Acting Director, Isaac Okorafor, said the apex bank had so far met all the legitimate forex demands from genuine customers. He reiterated that the CBN would ensure sustainable forex liquidity and transparency to enable as many customers as possible get access to the foreign exchange they genuinely demand.
He advised eligible individuals with genuine foreign currency needs to freely approach their banks and authorised dealers with their request, stressing that the CBN had made adequate provisions of foreign currency for all such legitimate purposes.
The CBN has also reiterated its stance towards intervening at the Interbank Foreign Exchange market. It warned speculators against “nefarious activities’’, stating that checks were in place to guard against unlawful practices.
The economy has also enjoyed major inflow of forex in recent months with over $6 billion recorded in the Investors’ & Exporters’ FX Window – I&E FX Window- launched by the CBN in April.
The I&E FX window, also called willing-buyer willing-seller window, allows foreign investors to find buyers for their dollars at a mutually-agreed price. The CBN controls about 15 per cent of all the transactions carried out in the window.
Afrinvest West Africa Limited Managing Director, Ike Chioke, said the jump in foreign inflows was not a surprise given the development in the FX market, particularly the launch of the I&E FX window in April.
“The largest volume of foreign inflows was recorded in May, underlining the positive impact of forex market transparency and flexibility on investor confidence. The knock-on effects of strong portfolio flows are already evident in performance of the domestic equities market which has historically been driven by foreign portfolio investors,” he said.
Okorafor said the success recorded at the I& E FX Window was an indication of the appreciable level of confidence in the foreign exchange management by foreign investors and autonomous suppliers of foreign exchange to the market.
Nigeria’s currency crisis was triggered by low oil prices, which have adversely affected its foreign reserves and created chronic dollar shortages. It was the need to curb these dollar shortages that prompted the CBN to regularly inject dollars into the market to narrow the spread between the official and black market rates.
Last week, the official segment of the forex market, the CBN conducted its weekly forex sales with $100 million offered at a fixed rate of N330.00/$1 while official rate pegged at N305.95/$1.
At the Interbank market, the naira rose by 0.8 per cent week-on-week against the dollar to close at N355.49/$1 on Friday.
At the parallel market, the naira held steady at N367/$1 between Monday and Wednesday, but closed lower at N369/$1 on Thursday, indicating a 1.1 per cent depreciation week on-week.
