Speculators and naira traffickers have gotten their fingers severely burnt as the naira sustained its upswing against the U.S. dollar on the parallel market yesterday.
It closed at N450/$, stronger than the N480 to the dollar from the previous day on renewed confidence in the forex market, gaining N75 in just three days as a result of the new policy actions introduced by the Central Bank of Nigeria (CBN), reports Thisday Newspaper.
The sell rate of the dollar also improved yesterday to close N430/$, as against the N460/$ at which it closed on Thursday as speculators are wary of buying dollars at higher rate, as many have already lost millions of naira.
Yesterday, the Central bank pumped more dollars into the market with each BDC getting $8,000. The apex bank has pledged to sustain the supply.
According to Thisday reports, many of the parallel market operators are trying to slow down the fall of the dollar to mitigate the heavy losses they are currently suffering.
Some of them was quoted by the Newspaper as saying that they had bought huge volumes at over N500/$ in the hope that the naira will continue to fall, only for CBN to dramatically intervene, leading to the naira gaining substantially against the dollar.
A CBN official who pleaded anonymity promised that the bank is ready to supply the BDC more dollars than they will know what to do with.
The CBN had in a statement titled: “New Policy Ac- tions in the Foreign Exchange Market,” on Monday, among other things, resolved to ease the burden of travellers and ensure that transactions are settled at much more competitive exchange rates and had directed all banks to open FX retail outlets at major airports as soon as logistics permit.
Furthermore, as part of efforts to further increase the availability of FX to all end- users, the CBN said it decided to significantly reduce the tenor of its forward sales from the current maximum cycle of 180 days, to no more than 60 days from the date of transaction.
Speaking on the new FX actions, the Chief Executive Officer, BIC Consultancy Services, Dr. Boniface Chizea, pointed out that the reduction of the wide gap between the official interbank window and the parallel market rate was the major reason for the recent changes to the approach to the determination of the exchange rates.
“And if the recent steps did not breach the gap between the official and parallel market we must then consider this experiment a grand failure. But really it is logical that if you remove a large junk of demand from the parallel market as the recent measures are bound to guarantee that the rates would inevitably appreciate.
“One thing you could say about the parallel market rates is that the rates are very responsive to the movement in demand and supply situ- ations. One thing which the monetary authorities must guard against to ensure success is diversion and no round tripping must be countenanced in this respect. Otherwise the full benefits of the recent measures would not be realised,” Chizea added.