By Omodele Adigun and Uche Usim, Abuja
The Central Bank of Nigeria(CBN) has set a new Naira exchange rate on Monday for end users with certain foreign expenses and stepped up dollar sales on the official market to narrow the spread with the black market.
Analysts doubted whether the moves would draw investors back to the struggling economy.
Recall that the country operate, at least, five exchange rates — the interbank, the black market, a rate for Muslim pilgrims, a retail rate set by licensed exchange bureaux and a rate for invisibles such as foreign travel, school and medical fees.
It was this last that was changed — to N360 to the dollar, a four per cent rise since the last rate was set.
CBN, opposed to a free naira float, has been selling the greenback at the official window to narrow the spread with the black market rate, which was at N390 last Friday, from N520 to the dollar a month ago. On Monday, the bank offered $100 million on the forward market to boost liquidity. However, it sold naira on the spot market at 306.30.
“Investors are clear that what they want is a properly functioning foreign exchange (FX) regime where … new FX shortages are not threatened. The new system does not currently meet those requirements, even if FX sales have increased,” said Razia Khan, Africa chief economist at Standard Chartered Bank.
The central bank also barred banks from reselling foreign currency to retail exchange bureaux to curb speculation.
Commenting on the rates, Alhaji Aminu Gwadabe, the president of Association of Bureau de Change Operators of Nigeria(ABCON), told a foreign news outlet that his members had incurred currency losses of N130 million based on the rate differential after the central bank sold $25 million to them at N381 last week.
Gwadabe said that Bureau de Change Operators might boycott CBN sales this week, adding that the regulator must review the multiplicity of rates on the currency market.
“The multiple currency system currently in place makes it difficult to ascertain how much pressure the naira is still under, and this also complicates pricing for investors,” said Cobus de Hart, senior economist at NKC in Johannesburg.
“We remain sceptical in relation to the central bank’s current approach,” he said, adding that lower oil prices, a slowly rising foreign reserves and currency forwards due to mature, may soon test the bank.
Meanwhile a statement from the CBN on Monday said it pumped $185million into forex market for sale to the banks and crashed rate for invisibles to N360/$1.The statement said the amount is to be sold to Deposit Money Banks (DMBs) at the rate of N 357/$1 for onward sale to retail end-users at not more than N360/$1 for Basic Travel Allowance(BTAs), medicals, school fees and other invisibles.
The apex bank also offered $100 million to authorised dealers in the interbank wholesale window yesterday to meet the forex requests of genuine wholesale customers.
According to its acting Director of Corporate Communications, Isaac Okorafor, the rates in the interbank window for wholesale transactions would still be determined by activities in the interbank market.
He added that all banks had also been directed to immediately post the new N360/$1 rate on electronic display boards in their branches, saying that examiners from the CBN would visit banks to ensure the new rates are implemented.
The CBN spokesman also pointed to the directive for banks to process and meet the demand for Travel Allowances (PTA/BTA) by end-users within 24 hours of such application, while applications for school fees and medical bills are to be met within 48 hours of such application.
Okorafor warned that the new move, aimed at further easing access of genuine end-users to forex, prohibited banks from selling foreign exchange funds, meant for invisibles, to Bureau De Change.
Going forward, he stated that all banks would receive amounts commensurate with their demand per week, which would be sold to customers who meet usual basic documentary requirements.
He, therefore, urged customers to report any erring bank to the CBN for investigation and appropriate sanction.