Since President Muhammadu Buhari’s inauguration on May 29, there has been a sharp decline in the exchange rate of the Naira against the Dollar at the parallel market as against Buhari’s electoral promise to make both currencies equal.
The Naira has fallen from N180 to N222 against the Dollar at the parallel market despite The President making heavy promises at the Dan Anyiam Stadium in Owerri, Imo State.
- “It is sad that the value of the Naira has dropped to more than N230 to one Dollar. This does not speak well for the nation’s economy,” he said without indicating as to how he is going to achieve this Naira-Dollar parity.
The Acting National President, Association of Bureau De Change Operators, ABCO, Alhaji Aminu Gwadabe, made the sharp decline known on Tuesday, asserting that the Naira’s outlook at the parallel market looked bleak due to a huge demand for dollars by importers and investors.
He forecasted that the currency might fall to N230 against the Dollar in the coming weeks if the Central Bank failed to deploy measures to curb the increasing Dollar demand at the parallel market.
- “There is pressure on the naira again. Maturing import bills are making the demand for dollars to rise again. Most importers and investors are saying they could not access dollar at the official market.
“They are now turning to the parallel market, a situation that is now fuelling the demand for dollar and other foreign currencies at the parallel market.”
He noted that increased business activities have made importers and investors to move their foreign exchange demands to the parallel market, putting pressure on the Naira.
The Dollar was sold for between N220 and N222 on the streets of Lagos, Abuja and Kano on Tuesday, while the Pounds and Euro were sold for N350 and N249, respectively.
CBN has been depleting the external reserves in a bid to defend the local currency.
At the interbank forex market, where the apex bank intervenes regularly to defend the currency, the Naira closed at 199 against the dollar on Tuesday, data from the FMDQ OTC website showed.
The external reserves fell to $29.03bn on June 22, from $29.8bn on May 18, data from the CBN website showed. Prior to the latest development, the foreign reserves had been stable for several weeks.
Concerned about the depletion of the reserves, the CBN met with bank officials on Friday to discuss how to mitigate the pressure on the external reserves.
The CBN has yet to make the outcome of the meeting official but sources said the apex bank wanted the banks’ cooperation in order to reduce the pressure on the reserves.
Bank officials have urged CBN to relax its rules in the forex market and allow the Naira to find its level.
It is unclear if the CBN will accede to the demand of the banks to relax the rules in the forex market, but the Spokesperson for the CBN, Mr. Ibrahim Mu’azu, could not be reached immediately for comments.
Last November, the CBN devalued the Naira from N115 to N168 to a US dollar after spending several billions of Dollars to defend the local currency.
This is as far as official exchange rates are concerned, but the reality, however, lies in how much a US dollar is being sold for in the parallel (black) market, which is somewhere, between N208 to N215 per dollar.
One needs to understand that Nigeria’s economy is largely dependent on oil revenue, so when oil prices fall, it affects the economy and the Naira loses value.
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