Experts fault NAFEM intra-day rates, demand full disclosure, transparency
The rate represents a 2.9 per cent appreciation from the
N1,598.54 traded on Monday and a meagre 0.58 per cent against Tuesday’s rate.
According to data from the FMDQ Securities Exchange-a
platform that oversees FX trading in Nigeria-the local currency hit an all time
intra-day high of N1,755 and an intra-day low of N1,050.
Also, the foreign exchange turnover increased to $172.14m
from the $66.43m and $117.32m recorded on Monday and Tuesday, respectively.
Banks sale of approximately $172m on Wednesday represents
about 47 per cent increase from the $117m sold on Tuesday. While the sale of
forex on the FMDQ is dominated by banks, the Central Bank of Nigeria and
multinationals especially oil firms also participate in the sale and purchase
of forex on the platform.
However, the Wednesday’s 1,542.58/dollar closing rate of the
national currency at NAFEM further widened the gap between the official and
paralleled market rates.
On Wednesday, the naira depreciated further to 1,900 against
the dollar at the parallel market, bringing the gap between the official and
black market rate to over N300 and fuelling concerns over round-tripping.
Analysts and Bureau De Change Operators predicted on
Wednesday the local currency might reach all-time low of 2,000/dollar at the
parallel market before the end of next week.
A BDC operator in Wuse, Abuja, identified as Abubakar Yahu,
said the demand for the greenback was fuelling volatility.
He said, “Today’s rate was at N1,900. We bought at
N1,900/dollar and sold around N1,850 and
N1,870. Some people say the rate may hit N2,000 by next week or before then.”
Also, A BDC operator in Allen Avenue, Ikeja, Lagos, Mr Lawan
Lawal, said the local currency was bought and sold at N1880/dollar and N1,860,
respectively.
Another BDC operator at the Lagos airport, Mustafa Zakari,
said the naira-dollar exchange rate had experienced high volatility at the
parallel market in the past few weeks due to the activities of currency
speculators.
On Wednesday, we learnt that operatives of the Economic and
Financial Crimes Commission stormed the Wuse Zone 4 market in search of
currency speculators.
The development was part of ongoing efforts by the EFCC and
the CBN to restore exchange rate stability and boost forex liquidity.
It was learnt the CBN and the EFCC, supported by the Office
of the National Security Adviser were determined to deal with currency
speculators whose activities had led to widening gap between the official and
parallel market rates of the naira against the US dollar.
The Office of the NSA had in a statement on Tuesday said it
was working with the central bank to tackle illicit financial activities.
The partnership, according to ONSA, will involve a
coordinated effort with key law enforcement agencies, including the Nigeria
Police force, EFCC, Nigeria Customs Service and the Nigeria Financial
Intelligence Unit.
However, it appears the efforts have yet to yield the
expected results, as the naira continues to fluctuate at both forex markets.
President Bola Tinubu on Tuesday said his administration was
making efforts to raise at least $10bn to increase forex liquidity and
stabilise the naira.
In June 2023, the Tinubu administration floated the naira.
The CBN subsequently diirected commercial banks in Nigeria to sell forex freely
at market-determined rates.
In a series of guidelines recently, the CBN ordered Deposit
Money Banks to sell their excess dollar stock and maintain certain level of
prudential thresholds. The moves were aimed at raising dollar liquidity in the
market.
Last week, the apex bank released another set of guidelines
that stopped banks from paying Personal Travel Allowance to their customers in
dollars. it also asked International Oil Companies not to repatriate all their
revenue to their parent companies at once. The apex bank, in another circular,
reviewed its guidelines to stop under-invoicing of exports and over-invoicing
of imports.
Despite the central bank’s efforts to boost forex supply
through various policy interventions, challenges have persisted in the forex
market.
Meanwhile, analysts and some stakeholders have faulted the
intra-day rates at the official NAFEM, raising concerns over the huge gap
between the intra-day high and intra-day low rates.
They said the huge gap between the intra-day rates indicated
there was a need for more transparency and disclosure at NAFEM.
Chief Executive Officer of Cowry Treasurers Limited, Charles
Sanni; and President of the Association of Bureau De Change Operators of Nigeria, Aminu Gwadabe, spoke on the
various challenges facing forex market especially NAFEM.
Gwadabe, while querying the huge gap between both rates,
said there was a need to separate the ownership and structure of the FMDQ
Exchange.
He said, “The gap between the intra-day high and intra-day
low is too huge. There is also lack of adequate disclosure on who bought what
and who sold what on the platform. There is a need to publish this on the FMDQ
websites.
“However, my worry is that FMDQ is 90 per cent owned by the
banks and 10 per cent owned by the CBN. The banks dominate the place. So, there
is an issue here. How can we call this the official rate? I feel the government
needs to set up a platform that would be fully independent.”
The ABCON president also wondered how a circular issued by
the CBN led to the movement of rates on the FMDQ platform from N900/dollar to
over 1,400/dollar.
Gwadabe explained, “This is unacceptable. The country needs
patriotism. FMDQ needs to be more transparent, committees can be set up. There
is exchange rate volatility which is driven by speculation and other
activities.”
The Chief Executive Officer of Cowry Treasurers Limited,
Charles Sanni, speaking with The PUNCH, however, said the wide gap between the
intra-day trading rates of dollars at the official market was an abnormal
situation driven by poor forex supply.
He said, “This shows that while the demand is there, the
supply is not okay. That is what is responsible for it. It just speaks to the
fact that there is a scarcity of foreign exchange. That is why traders would
quote only one-way. It usually occurs in an abnormal situation.”
Efforts to get the CBN to comment on the development did not
yield any result. Calls made to the Acting Director, Corporate Communications,
CBN, Hakama Sidi Ali, by our correspondent, was not responded to as of the time
of filing this report.
However, according to top official who spoke on condition of
anonymity because he was not authorised to speak on the matter, the CBN does
not publish the details of parties who bought and sold on the FMDQ platform.
The official also explained that only the participating
banks to the transactions know those details.
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