Foreign exchange (forex) speculators from Benin Republic, Niger, Chad, Sudan, Ghana and other African countries are cashing in on the wide margin between the official and parallel market rates to make huge profits, The Nation reports.
The speculators are moving in huge dollar deposits to meet the rising demand by Nigerian importers and other buyers requiring dollar to pay their children’s school and medical fees.
Although the exchange rates are high, the urgency and necessity left the buyers with no option than to buy from the parallel market.
The official exchange rate has remained at N197 to a dollar in the last six months, creating a huge gap between the official or interbank rates and parallel market rates.
Confirming the development, President of the Association of Bureau De change Operators of Nigeria (ABCON) Aminu Gwadabe said over $100 million inflow was recorded last Friday.
He said this led to a temporary appreciation of the naira against the dollar.
The naira, on Friday, traded at N365 to a dollar – from N391 the previous day – because of the liquidity the dollar inflow brought to the market.
Gwadabe said by Saturday, the naira again depreciated against the dollar as it exchanged at N375 to a dollar, adding that the volatility is expected to continue this week.
“Foreigners are taking advantage of the naira situation. We have 18 countries within the continent where the naira is accepted. The speculators are coming in because of the huge gap between official and parallel market rates,” he said.
Gwadabe said exporters, mainly from Dubai, have agents in Nigeria, who accept naira from importers at agreed dollar rates.
The importers travel with certified invoice to bring in the goods, a practice, he said, reduced pressure on the naira.
“In my view, the CBN should address the supply side of the market by allowing oil companies and banks to sell dollar to bureau de change operators as a measure to reduce pressure on the naira,” he said.
Tumbling global oil prices have battered Nigeria’s crude exports, with foreign exchange reserves down to an 11-year low at $27.85 billion.
The Federal Government is concerned that further naira depreciation would hurt Nigerians, but the CBN’s refusal to revise the pegged exchange rate widened a gap between official rates and the parallel market.
Managing Director of Cowry Assets Management Limited Johnson Chukwu said economic agents “are rational, and will go to where their values will be maximised or their risk minimised”.
He said Nigeria did not have the financial resources to solely develop its economy in the short to medium term and that current global social architecture made absolutely closed economic borders impossible.
“The crisis in the economy seem to be worsening since the crash in oil prices from about $115.09 (Brent crude spot price) on June 19, 2014, to $34.83 (Brent crude) today.
“This is despite a barrage of monetary and administrative policies introduced by the CBN to stabilise the exchange rate and restart economic growth.
“While the CBN has been active in trying different options, business managers and investors are still waiting for the managers of the fiscal policies to present their response to the crises, which should be harmonised with those of the monetary authorities,” he said.
Chukwu insisted that while the CBN effectively maintained the official exchange rate at N197 to a dollar, it has been impossible for it to meet the legitimate demand at the official window at the stipulated official rate.
“It is the backlog of unmet demand, which has spilled over to the shallow parallel market and driven down the naira,” he said.
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