By Chinwendu Obienyi
Nigeria’s Naira took a major haircut in first day trading at the parallel maket as it fell significantly against the U.S. dollar on Wednesday, after the Central Bank of Nigeria (CBN) banned sale of forex to Bureau De Change (BDCs) Operators.
Data obtained from abokiFX.com, a website that collates parallel market rates, revealed that the Naira, which opened yesterday’s trading session at N505 per $1, fell to N522 to a dollar at the parallel market segment, implying a N17 or 3.40 per cent value erosion from N505 at which it closed at the previous session of the black market on Tuesday- its biggest fall since February 2017.
This was as the dollar traded for N411.52 per dollar at the importer & exporter (I&E) window.
Similarly, the Naira was exchanged at N710/Pound Sterling as against N700 at which it traded on Monday, while its exchanged for N600/1 Euro as against N590 traded previously.
The CBN governor, Godwin Emefiele, had announced on Tuesday that the $110million weekly forex allocation to BDC operators in the country has stopped.
While noting that the BDCs have become a fulcrum for corrupt Nigerians to launder money to wreck the economy, Emefiele stated that commercial banks are mandated to immediately and transparently sell forex to end users who present the required documents, saying all banks are to immediately create dedicated tellers for that purpose.
He said the CBN would channel weekly allocations of dollar sales to commercial banks to enable them meet legitimate foreign exchange demands.
He said, “They (BDCs) have turned themselves away from their objectives. They are now agents that facilitate graft and corruption in the country. We cannot continue with the bad practices that are happening at the BDC market. Several international organisations, embassies patronise BDC through illegal forex dealers to fund their institutions. We will deal ruthlessly with Nigerian banks that deal with illegal BDCs and we will report foreign organisations patronising them.”
But reacting to the development around the Naira, analysts who spoke to Daily Sun, said they expect the CBN’s decision to lead to further pressure on naira exchange rate.
Economic analyst and Co-Managing Partner at Comercio Partners, Nnamdi Nwizu, said the CBN was simply trying to sell the volumes through the banks, noting that unless the apex bank can get banks to reduce required documentation for the FX that they will be selling from their branches, leaving a big possibility the black market to continue to get wider.
He noted that the same scenario happened in 2016 when the CBN banned the BDCs and by the end of 2016, the Naira was devalued by 40 per cent adding that unfortunately everybody takes that parallel market figure as the proper value of the Naira.
“So if the Naira continues to move, then you end up seeing another wider spread between the official rate and the black market and eventually the official rate goes to meet the black market. This is because people bringing in money will not want to sell to you at official rate when they know they can sell in the black market and so money starts to dry up in the official market because fewer people (Local and Foreign) will want get from the market at N522 to a dollar.
For their part, analysts at Cordos Capital said, “In the short-term, we expect the new development to lead to further pressure on the exchange rate in the parallel market given the lag between commercial banks settling to adjust to the CBN’s directive and knee jerk reaction from market participants induced by the urge to stockpile the greenback to mitigate an expected exchange rate pressure.
Meanwhile, Mr Okechukwu Unegbu, former bank Chief Executive has urged the Central Bank of Nigeria (CBN) to be cautious of its recent “blanket’’ ban placed on Bureau de Change (BDC) operators from foreign exchange (forex) trading.
Unegbu, a past President of the Chattered Institute of Bankers of Nigeria (CIBN), made the call in an interview with newmen in Abuja.
He said that the ban would create some challenges in the market as commercial banks might not be able to meet the forex demands of importers.