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Naira depreciates to N270/dollar in parallel market

By The Citizen
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The Naira, on Wednesday, depreciated further to N270 per dollar at the parallel market, following reduction of dollar sales to bureaux de change (BDCs) by the Central Bank of Nigeria (CBN).

Vanguard Investigation revealed that from N260 per dollar at the close of business on Tuesday, the parallel market exchange rate rose sharply to N270 per dollar in Lagos, indicating N10 depreciation.

But in Abuja, the parallel market exchange rate rose from N262 per dollar to close at N273 per dollar, indicating N11 depreciation.

BDC operators, who confirmed this development to Vanguard, said that the sharp depreciation was due to further reduction in the weekly dollar sales by the CBN.

President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe to Vanguard that though the CBN increase the number of BDCs it sold dollars to from 1,170 last week to 2,270 this week, it however reduced the amount of dollars sold to each BDC by 60 percent from $30,000 to $10,000.

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According to Mr. Harrison Owoh, Chief Executive Officer, H.J Trust BDC, the decision of the CBN aggravated the demand situation in the market.

'There is huge volume of unsatisfied demand in the market. We had to turn down lots of request for dollars because of there is no dollars to sell to them', he told Vanguard.

An Abuja based BDC operator, who spoke on condition of anonymity told Vanguard, 'The dollar is selling at N273 in Abuja this evening. It was N262 in the morning. We are surprised at the pace of depreciation, because we can't explain why it just went up by such margin in one day'.

Commenting on this development, Director, Corporate Communications, Central Bank of Nigeria (CBN), Ibrahim Mu'azu said that the reduction in dollar sales to BDCs is part of the demand management of the CBN in the foreign exchange market. He said that the depreciation of the naira to N270 per dollar is a speculative reaction to the development. 'The rate is not sustainable', he said. 'This is because there are still other windows for end users to buy dollars at lower rate. They can buy dollars at the official rate from the deposit money banks, and from Travelex inside the airport. So by the time people know about these alternatives, the reaction in the parallel market, and the exchange rate will calm down.'

Further investigations reveal that the naira also depreciated heavily against the British Pounds. From N365 per Pounds at the close of business last week, the parallel market exchange rate rose sharply to N385 per Pounds at the close of business yesterday.

In addition to the reduction in dollar sales by CBN, foreign exchange supply from autonomous sources is thinning due to hording. 'People are hording their dollars in anticipation of further depreciation of the naira, while some are demanding higher exchange rate before they sell,' said the Abuja based BDC operator.

The anticipation of further depreciation is been driven by speculations that the reduction in dollar sales by the CBN might be followed by outright cancellation of the weekly dollar sales programme which was introduced in 2006. 'The naira will hit N300 per dollar, if the CBN cancels the weekly dollar sales, projected the Abuja BDC operator.'

Recall that last week the CBN introduced revised guidelines for BDCs which tightened regulation of BDC operations. Among other things the apex bank banned BDCs from having branch directing them to close all their branches within 90 days. The new guidelines also banned BDCs from having business relationship with street currency hawkers, saying it would revoke the operating license of any BDC with business relationship with street currency hawkers.