The Nation Newspaper

Tag: parallel market

  • CBN targets N200 per dollar parallel market rate

    CBN targets N200 per dollar parallel market rate

    The Central Bank of Nigeria (CBN) is targeting a N200 to dollar exchange rate in the parallel market, The Nation has learnt.

    The naira which yesterday traded at N330 to dollar in the parallel market is expected to appreciate speedily, as the impact of the CBN’s measures to stabilise the currency volatility in the parallel market begin to materialise. President, Association of Bureau De Change Operators of Nigeria (ABCON) said the N330 rate in the parallel market is an improvement from last week’s rate when the naira exchanged for N391 to dollar.

    The strident calls by the IMF and some foreign interest for Nigeria to devalue its currency and the artificial spike in Forex rate created by Bureau De Change operators appears to have tanked. This has been linked to a complex and integrated currency management approaches deployed by the Central Bank of Nigeria (CBN).

    According to a top source in the apex Bank, “The aim of CBN is to ensure that the divergence between the official and parallel rate does not exceed N3, so we are looking at a parallel market rate of N200/$ because the downward trend in the pressure on the naira will be sustained.

    “The CBN has the capacity to sustain the downward pressure and will deploy further currency management initiatives, while capitalising on fiscal policies of the federal government to remain in support of non-devaluation of the Naira. The current stand of the federal government on Nigeria’s legal tender is Non-Devaluation. It will be unwise for anybody to be hoarding dollars because we can assure you that naira appreciation is going to trend upwards going forward.”

    So far, the CBN in a bid to manage the pressure on supply has deployed over $11.7billion to support Agricultural Sector, SMEs, manufacturers and others. This has reduced patronage of black market by end-users and has forced rent seekers to dump the greenback thereby creating a dollar-glut in the black-market.

    The source noted that it has been observed that most of the imports that were draining forex resources have since found local substitutes with attendant savings in forex and shortage of demand for the greenback, which was fuelling the pressure, this is also coming on the heels of the CBN instruction to commercial banks to publish allocation of forex to end-users. This has in recent times ensured that the real sector of the economy and genuine users for education and medicals have been able to access Forex at official rate.

    Industry analysts have also described the development as a game changer for majority of local manufacturers in Nigeria. The manufacturers acknowledged that the impact of CBN policy on forex since, its inception has more than doubled their productive capacity, with attendant benefits in terms of expansion to meet increasingly higher demands for their products and services.

    The Analysts said, “Conveniently, since the CBN foreign exchange policy came into existence, production capacity by local manufacturers has increased from 50 per cent to 70 per cent. This has impacted on their propensity to increase exports with higher volumes which is expected to also earn Nigeria commensurate higher foreign exchange earnings.”

    Speaking further, the analysts are of the opinion that the policy has helped the local manufacturers to realise the urgent need to expand because of increasing demands for their products.

  • Naira falls to N345 against dollar in parallel market

    Naira falls to N345 against dollar in parallel market

    The naira yesterday exchanged at N345 to the dollar in the parallel market. The exchange rate  volatility worsened thereby forcing the Central Bank of Nigeria (CBN) to devalue the official exchange rate to narrow the gap between it and the parallel market.

    The local currency eased 1.47 per cent from Friday’s close of 340 to the dollar, while the official rate remained at 197.50 to the dollar at the close of trading yesterday.

    Traders said the black market rate had slipped as Nigerians with school and medical bills to pay abroad anticipated the CBN would stop allocating currency for such payments. The bank has not denied or confirmed any such plans.

    Tumbling global oil prices have battered Nigeria’s crude exporter, with foreign exchange reserves down to an 11-year low at $27.85 billion by February 11.

    Nigeria’s government is concerned that further depreciation will hurt poor Nigerians, but the bank’s refusal to revise the pegged exchange rate has widened a chasm between official rates and the parallel market.

    “In my own view, the central bank should address the supply side of the market by allowing oil companies and banks to sell dollar to bureau de change operators as an immediate measure to reduce pressure on the naira,” said Aminu Gwadabe, head of the Association of Bureau de Change Operators of Nigeria.

    Managing Director, Financial Derivatives of Nigeria Limited, Bismark Rewane, said naira devaluation is the answer to Nigeria’s economic woes. The economist said there is a big difference between economic drama and reality adding that people denying the need for devaluation are same people that keep stealing from the people.

    He said those who want the naira not to be devalued should remember that it is all about  competitiveness adding that the local currency can also appreciate if things are done rightly.

    Rewane said that in the last 10 years, Western Union, Thomas Cook and others were bring dollars to the country. “The CBN said it sold $8 billion to bureaux de change (BDCs) in nearly two years but who are the owners of these BDCs? The issue is if you are a manufacturer and you get dollar at N197 from the CBN to import raw materials. There are two decisions to make.   Manufacture the goods and sell as if you bought the at N310 to dollar because of the wide gap between the official and parallel market rates, or open a Letter of Credit and refuse to import. Then roundtrip the money and make 50 per cent outright profit,” he said.

    He said devaluation will solve such problem because it will reduce the widening gap between the official and parallel market rates. He said many of the people asking government not to devalue the naira is because they want to abuse and steal the fund, pretending to be protecting the naira.

    “I can tell you, there are vested interests. They pretend to be protecting and defending the naira, but in reality, they are not. In 1987, the naira depreciated by 76 per cent and by 20 per cent in 2009. But when oil prices rose, did they allow the naira to appreciate?”

  • Naira strengthens against dollar at parallel market

    Naira strengthens against dollar at parallel market

    The Naira on Monday slightly strengthened against the dollar at the parallel market, in spite of scarcity of the U.S. dollar.

    The Naira gained one point to exchange at N305 from N306 it exchanged previously.

    At the official market, the Nigerian currency closed at N197 to the dollar.

    Traders in the parallel market, however, noted that the naira had remained stable, exchanging between N305 and N306 to the dollar.

  • Naira firms up at parallel market

    Naira firms up at parallel market

    The naira yesterday made a sudden recovery in the parallel market, following the Central Bank of Nigeria’s (CBN’s) easing of forex policies. The naira appreciated to N295 against the dollar from N305 on Friday, after the apex bank lifted the ban on dollar transfers and allowed dollar deposits into domiciliary accounts.

    The local currency has remained stable in the official market, exchanging for N199 to a dollar.

    Association of Bureau De Change Operators of Nigeria (ABCON) President Aminu Gwadabe said the naira was exchanging at N291/293 against the dollar in the morning but closed later at N295.

    He said although the CBN did not supply dollar to the market, its relaxation of forex restrictions that allowed banks to accept dollar deposits and transfer foreign currency deposits has helped shore up the value of the naira.

    CBN Spokesman, Ibrahim Mu’azu, said the apex bank decided to reverse the policy because its finding shows that currency substitution by customers which made it enforce it in the first place has been tackled.

    He said bank customers were before now, converting naira to dollar, and depositing the proceeds with the hope that the dollar will continue to appreciate in both the parallel and official markets.

    But other market sources believe the lifting of the over six-month old dollar transfer ban, followed outcry from local and international stakeholders who insisted that a restriction on such transfers is not only killing businesses but has led to diversion of huge forex to neighbouring countries of Ghana, Togo and Cotonu.

    In wake of the policy implementation, Nigerian importers were diverting the payment for their imports to these neigbouring countries and the Port of Tema and Tokoradi Port in Ghana as well as the Port Autonome de Cotonou, in Benin Republic.

    The lifting of the CBN’s ban on dollar deposit transfer, is part of the gradual relax of its stringent foreign exchange (forex) policies triggered by sharp drop in crude oil prices and reduced inflow of petrodollars.

    It is also in response to International Monetary Fund (IMF) advice that the polices should be relaxed to avoid alienating Nigeria from its international trade partners.

  • Naira weakens against dollar at parallel market

    Naira weakens against dollar at parallel market

    The Naira on Monday depreciated by 0.8 per cent to exchange at N265 to the dollar at the parallel market.

    The News Agency of Nigeria (NAN) reports that the greenback lost N2 to the dollar from its weekend value of N263.

    However, at the official interbank window, the Naira exchanged at N197 to the dollar.

    Traders at the market were hopeful that the Naira would rebound in 2016 if the apex bank continued to enforce its policies at the foreign exchange market.

    Besides, the price of crude oil at the international market hedged up to 38.9 dollars per barrel from about 35.7 dollars per barrel at the weekend.

    Oil prices rose on Monday after a breakdown in diplomatic ties between Saudi Arabia and Iran that some speculated could result in supply restrictions.

    Saudi Arabia, the world’s biggest oil exporter, cut diplomatic ties with Iran on Sunday in response to the storming of its embassy in Tehran following Riyadh’s execution of a prominent Shi’ite cleric on Saturday.

  • Naira strengthens against dollar at parallel market

    Naira strengthens against dollar at parallel market

    The naira on Wednesday strengthened against the dollar as currency speculators feared that the apex bank might come up with policies that might be unfavourable to them in 2016.

    The News Agency of Nigeria (NAN) reports that the naira gained N1, an appreciation of 0.4 per cent, to exchange at N226 to the dollar as against its previous value of N227.

    However, at the official inter-bank window, the naira continued to exchange at N197 to the dollar just as available apex bank’s record puts the price of crude oil at 36.09 dollars.

    Traders at the parallel market told NAN that the appreciation was fuelled by currency speculators.

    They envisaged that the apex bank might come up with policies that would affect them negatively in the New Year.

  • Naira depreciates at parallel market

    Naira depreciates at parallel market

    The naira on Friday depreciated at the parallel market barely 48 hours after it strengthened against the dollar.

    The News Agency of Nigeria (NAN) reports that the naira lost N2 to exchange at N242 to the dollar, as against its previous value of N240.

    Meanwhile, the official inter-bank rate remained at N197 to the dollar.

    Traders at the market said that in spite of the biweekly sale of forex to Bureaux de Change (BDC’s), the currency of the biggest economy in Africa continued to slide.

    They attributed the development to the difficulty encountered by some BDC operators in disposing their forex due to the apex banks regulation on forex sales.

  • Naira depreciates at parallel market

    The Naira on Friday depreciated against the dollar at the parallel market.

    The Naira lost N0.5 in the afternoon as it exchanged for N225.5 against the dollar, slightly less than its previous value of N225.

    Meanwhile, at the interbank window, the Naira exchanged at N197 to the dollar.

    Traders at the market said that the demand for dollar had been on the increase as businessmen and travelers bought it for various reasons.

  • Interbank, parallel market rates gap worsens

    Stakeholders in foreign exchange market have described the gap between the interbank foreign exchange and parallel market rates as worrisome.

    Currencies Analyst at Ecobank of Nigeria, Olakunle Ezun, said while the Central Bank of Nigeria’s (CBN)  administrative measures helped harmonised the foreign exchange market and stabilised the naira around a daily average of N198 after the initial adjustment, the gap between the inter-bank and bureau de change (parallel market) rates is worrisome.

    The greenback exchanges at over N220 to dollar at the parallel market, which is about N22 gap between both rates.

    He said overall, the CBN has reiterated its commitment to exchange rate stability but highlighted key upside risks to naira stability, including the weakening oil prices, impact of United States’ policy normalisation, the marginal level of oil savings which weighs negatively on market confidence, along with election-related spending pushing liquidity above target.

    The analyst said the Monetary Policy Committee (MPC) of the CBN met last month and decided to leave the Monetary Policy Rate (MPR) unchanged at 13 per  cent, highlighting risks to naira and inflation rate in short term.

    “We anticipated the decision to hold the MPR at 13 per cent to allow the monetary policy decisions of November 2014 and the effects of other administrative measures to be fully transmitted throughout the economy until the elections have taken place, before assessing whether further tightening is necessary. This is important as raising interest rates just before a national election would likely be avoided by any central bank,” he said.

    He said the MPC decision to hold policy steady was based on several competing domestic and external factors such as the overall weakening of the economy driven by low oil prices; effects arising from the normalisation of monetary policy in the U.S; currency substitution and partial dollarisation of the economy.

    Others are  the uncertainty over the growth outlook, which has moderated partly by the effect of low oil prices, naira depreciation and election concerns;  inflation rate and outlook which had risen steadily from eight per cent in December 2014 to 8.2 per cent in January and 8.4 per cent in February 2015.

    Head Markets, FBN Capital, Olubunmi Ashaolu, said the MPC’s unchanged stance was widely anticipated.

    “We are not aware of any such independent committee in the world announcing a change in direction in the week of an important election. The reputational risks for committees are too high. This does not mean that the MPC in Nigeria wanted to tighten and did not move under external pressure.

    “On the contrary, the committee wants to assess the impact of its previous measures, notably the rate rise and de facto devaluation in November as well as the CBN’s decision on 18 February to scrap the retail Dutch auction system (RDAS) of bi-weekly foreign exchange auctions,” he said.