Forex crisis: Exchange rate now N400/ USD1 in parallel market

In what is ending up being progressively clearer, a cocktail of bad choices, incoherent policies intensified by instability in the markets, as well as a fastidious clinging to old-fashioned ideas, the fate of the Naira hangs in the balance as it continues its down slide. This report will show why the Muhammadu Buhari administrations misplaced belief that hope is finest served for supper, at a time when there might be no one at the table because the diagnoses for the Naira and the economy, do not motivate self-confidence and growth.

Sustained, unmet demands during the week, forced the Naira to diminish to a record low of N385-N400/ US$ 1.00 at the weekend, revealing an unprecedented week-on-week decline of 13.8 percent in the parallel market.

Central Bank of Nigeria, CBN, had intervened with products of the foreign currencies on Thursday at the interbank market where banks purchase foreign currencies at the main rate of N197/ US$ 1.00,

Unfortunately, market dealerships regretted that the volume provided was too small to satisfy the demands presented by the count on behalf of their consumers.

They informed Sunday Vanguard that the development triggered crazy recourse to the parallel market by some dealerships and their consumers the next day, crashing the delicate Naira even more.

The dealerships are raising fears that the decline would continue in the new week as there appear to be no response to the trend yet from the monetary authorities.

Among the BDC operators and President of BDC association in Nigeria, AminuGwadabe, said we have demand coming from importers while dollar supply has dried up.

He had actually also seen Reuters, in my own view, the reserve bank needs to deal with the supply side of the market by allowing oil business and banks to sell dollar to Bureau de Change operators as an instant measure to decrease pressure on the Naira.

Some monetary market observers think that the exchange crises are now made complex with malpractices spreading beyond the initial claims of CBN that it was the BDCs that were involved in arbitraging, an accusation which was followed with a ban on their participation in the CBN forex sales at the official rate last month.

Operators believe CBN’s intervention in the inter-bank sector would not be able to stem the slide in the value of Naira in the parallel market unless the pinnacle bank increases its volume of foreign currency sales and possibly revert to day-to-day sales rather of when a week intervention.

This claim fuels speculations that, in some way, even the foreign currencies offered to banks by CBN discover its way into the parallel market.

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