The naira suffered a fresh slide both at the official and parallel foreign exchange markets on Friday.
The national currency depreciated to on Friday N1,670/$ from
N1,600/$ recorded at the close of trading activity on Thursday at the parallel
market, while it closed at an official rate of N1,537/$ on Friday from N1,498/$
recorded the previous day.
The fresh rates also created N133 gap between the official
and parallel market, signalling fresh concerns about round-tripping.
This development is despite increased dollar supply worth a
total transaction volume of $3.83bn in eleven days of trading activities
through the Nigerian Autonomous Foreign Exchange by Deposit Money Banks.
Data obtained from FMDQ Securities Exchange, a platform that
publishes official foreign exchange trading in the country, between February 2
and February 15, showed that the increase in forex transactions.
Commercial banks, Central Bank of Nigeria and international
oil firms are the major sellers on forex at NAFEM.
The improved liquidity at NAFEM followed a directive by the
Central Bank of Nigeria which had asked banks to sell their excess dollar stock
and improve liquidity in the FX market.
The FMDQ report indicated that the banks led others to sell
$1.97bn in the first week of the CBN circular which had mandated banks not to
exceed a new threshold in their FX prudential guidelines.
Penultimate week, a breakdown of the daily activities from
Monday to Friday compiled by our correspondent showed that on Monday, the
official FX market recorded a turnover of $584.53m; Tuesday, it reduced to
$465.29m; on Wednesday it was $209.93m; Thursday it was $321.23m and on Friday,
it was $253.77m.
Further analysis for the week ending showed that the supply
started on a low at $116.11m on Monday; it increased by $292.3m to $381.92m on
Tuesday but dropped to $117.87m on Wednesday. On Thursday, the supply increased
to $336.11m.
Recall that in clusters of guidelines, the CBN ordered
Deposit Money Banks to sell their excess dollar stock over the growing trend of
banks holding large foreign currency positions. It also warned lenders against
hoarding excess foreign currencies for profit.
On Thursday, the apex bank released another set of
guidelines that stopped banks from paying Personal Travel Allowance to their
customers.
In a second circular signed by its Director, Trade and
Exchange Department, Hassan Mahmud, it also asked International Oil Companies
not to repatriate all their revenue to their parent companies at once. The apex
banks also, in the third circular, reviewed its guidelines to stop
under-invoicing of exports and over-invoicing of imports.
The Governor of the Central Bank of Nigeria, Olayemi
Cardoso, who also confirmed the significant rise in FX transactions during an
interactive session organised by the Senate Committees on Finance,
Appropriations, Banking Insurance and Other Financial Institutions, saying
recent reforms initiated by the central bank were yielding positive results in
the FX market as evidenced by the liquidity boost.
Nevertheless, despite the Central Bank’s efforts to boost
forex supply through various policy interventions, challenges persist in the
forex market.
The gap between the rates in the official market and the
parallel market is once again widening, raising concerns about the potential
resurgence of round tripping activities.
In response to the circular, banking institutions and IMTOs
are gearing up to implement operational adjustments to accommodate the revised
remittance framework by issuing notices to their customers.
Furthermore, the Central Bank’s decision is expected to
engender a ripple effect, catalyzing increased remittance inflows and
bolstering the country’s foreign exchange reserves.
On the official segment of the foreign exchange market, the
naira started at an all-time low of N1,534/$, indicating serious consequences
on the price of goods and services on Monday.
The naira gained marginally on Tuesday to N1,499/$ but fell
to N1,503.38/$ at the close of trading on Wednesday before recovering to
N1,498/$ at the close of trading activities on Thursday before ending the week
at the rate of N1,537/$.
Figures compiled by Saturday PUNCH from the parallel market
showed the naira depreciated to N1,670 on Friday from Thursday’s rate of
N1,600/$. This is about N97 or 6.45 per cent higher than the N1,503/$ at the
beginning of the week.
On the parallel segment of the foreign exchange market, the
naira depreciated to N1,600/$ Thursday’s rate is about N167 or 11 per cent
higher than the N1,503/$ at the beginning of the week. On Tuesday, it was sold
at N1,530 before jumping to N1,595 on Wednesday.
The naira depreciation followed a strong demand for dollars
by speculators as well as individuals travelling for business, tourism,
education and health, according to currency dealers.
Currency traders in Abuja, also known as Bureau De Change
operators, informed Saturday PUNCH that the dollar sold at that rate due to the
consistent demand for the greenback
A BDC operator, Ibrahim Yahu, said The dollar was already
approaching N1,700.
He said, “We started today’s trade at N1,610 but it just
jumped because of demand to N1,680 before reversing back to N1,670. If the
market is too much, there is nothing we can do. If care is not taken, it will
go back to N1,680.”
Another BDC operator, Abdullahi Taura, complained severely.
He said the increase was getting too much stressing that something must be done
urgently.
NACCIMA demands action
Meanwhile, the National President of the Nigerian
Association of Chambers of Commerce, Industry, Mines, and Agriculture, Dele
Oye, has called on the government to intensify efforts towards addressing the
twin economic challenges of naira devaluation and inflationary pressure in the
country
In a statement, the NACCIMA boss said a stable currency will
not only make agricultural inputs more affordable but will also bolster
consumer purchasing power.
Oye noted that the current exchange rate exerts inflationary
pressure on input costs, thereby affecting overall food prices, reiterating the
need for a robust economic policy aimed at stabilising the Naira.
He said, “A robust economic policy aimed at defending the
Naira to reach an acceptable exchange rate of 750 Naira to one USD is
essential. A stable currency will not only make agricultural inputs more
affordable but will also bolster consumer purchasing power,” he added.
“To further incentivise local production, we urge the
government to facilitate access to more single-digit interest loans and grants
for our farmers. This financial support is pivotal in empowering farmers to
scale up production and adopt modern agricultural practices.”
The NACCIMA boss also commended the recent resolutions by
President Bola Ahmed Tinubu and State Governors to prioritise and boost local
food production as a strategy to achieve food security in the Country and
improve the lives of the people.
He said, “I am expressing our support for the recent
resolutions by President Tinubu and state governors to prioritise and boost
local food production as a strategy to achieve greater food security in
Nigeria.
“We commend the President’s directive to state and federal
government agencies to enhance collaboration in bolstering local food
production rather than resorting to food importation and price control. This
approach aligns with NACCIMA’s core objectives of championing the agricultural
value chain and supporting local producers. It is a vital step toward
self-sufficiency and economic resilience.
“However, we believe that the issue of rising food costs is
multifaceted. While local production capacity is a critical factor, we cannot
overlook the significant impact of the depreciating value of the Naira. The
current exchange rate exerts inflationary pressure on input costs, thereby
affecting overall food prices.”
Speaking further, Oye appealed for the enhancement of
security and infrastructure in farming communities. These measures, he said,
would mitigate the risks faced by farmers, reduce production bottlenecks, and
increase efficiency throughout the agricultural value chain.
“We concur with the President’s call for vigilance against
hoarding practices that exploit consumers and distort market dynamics. NACCIMA
advocates for fair trade practices that encourage competitive pricing without
compromising the welfare of our local producers and consumers,” he added.
Oye plea comes in the wake of a protracted inflationary
pressure and exchange rate crisis that has hit the Nigerian economy.
On Thursday, data from the National Bureau of Statistics on
Thursday showed that Nigeria’s inflation rate climbed to 29.90 percent in
January 2024 from 28.92 percent recorded in the previous month.
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