The acute scarcity of dollars which hit the Bureaux De Change segment of the foreign exchange market, following the new policy of the Central Bank of Nigeria (CBN) not to sell forex to BDC operators, worsened yesterday as the naira hit an all-time low of N189 to the dollar.
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The Nigerian currency’s value has been depreciating on a daily basis, sometimes collapsing twice or more a day.
The dollar sold for N186 in the morning yesterday, but by the time LEADERSHIP went to press last night, the American currency was selling at N189.
Despite the massive depreciation of the naira in the forex market, majority of the BDC operators were not selling dollars to end-users yesterday because they were afraid that the CBN would revoke their licences if they were caught.
A source in the forex market in Lagos attributed the scarcity and consequent massive depreciation of the naira to hoarding by BDC operators, who were suspicious of strangers and would only sell to familiar faces.
The CBN allows the BDCs a maximum spread of two per cent of the official rate. The apex bank currently sells forex to banks at N146.28 to the US dollar.
It could be recalled that the CBN recently came up with a new directive which divided BDCs into categories, stating that each existing BDC could remain in operation as category B operator while only operators who meet the requirement to operate in category A would be allowed to access foreign exchange by the apex bank.
It said that the operators who want to upgrade to category A must meet a minimum paid-up capital of N500 million verifiable at all times, mandatory deposit with the CBN of $200,000- non interest bearing and non-refundable application fee of N100,000.
Other requirements include licensing fee of N1 million, annual renewal fee of N250,000 (subject to satisfactory reporting requirements and performance and minimum information technology infrastructure that enables the BDCs to make daily returns to CBN.
However, as a result of the directive, the naira, which exchanged at N172 to the US dollar on Tuesday depreciated further to N185 at the close of business transactions on Wednesday.
The BDC operators who confirmed the development said that the free fall in the value of the naira was due to shortages in the supply of the foreign exchange market.
They stated that the demand pressure, which outweighed supply, intensified immediately CBN stopped supplying forex to BDCs.
They explained that the fall in oil prices due to global financial crisis which reduced the Federal Government’s earnings, has made it more difficult for the apex bank to meet the forex demand that is rising on daily basis.
Financial analysts said that with the current situation the naira would depreciate further next week as BDCs resorting to autonomous market would provide an opportunity for banks to continue engaging in round-tripping since they are the only group allowed to bid in the twice weekly foreign exchange market.
They pointed out that officially banks are the only group that determined the rate the BDCs will sell their own forex.
Analysts said that with the global financial crisis it would be difficult for BDCs under category B to remain in business through autonomous sources because majority of Nigerians abroad who boost forex inflow to the sector by sending money to their relatives home are finding it difficult to do so.
Meanwhile, the Chairman of the Nigerian Economic Summit Group, Mazi Sam Ohuabunwa, who called for the full deregulation of the oil sector, said that the high demand for foreign exchange was because a substantial amount of dollars are used for importing fuel instead of developing the infrastructural facilities.
He said that the report on the CBN sales of the foreign exchange has shown that majority of the forex users are fuel importers.
The NESG chairman said that deregulation of the downstream sector of the oil industry will give the government an avenue to invest in other sectors of the economy instead of importing fuel.
Some parallel market operators who spoken to our correspondent in Abuja on the condition of anonymity said that the exchange rate hovers around N187/N189 to one US dollar, depending on some factors.
These factors, they said, include the total value of sale to each buyer and the availability of forex at the time of sale.
At the old Durbar Hotel Kaduna, a young man doing exchange transaction told LEADERSHIP, “Sincerely it is a worrisome situation because the demand for the dollar increased and we cannot satisfy the increasing demands on a daily basis. We now sell one US dollar at the rate of N189 , while we buy at N185.’
At the Hamdala Hotel area, many of the Bureaux De Change staff refused to talk to LEADERSHIP, insisting that it was only their chairman, Alhaji Shuaibu Abdullahi Shanono, that was in a position to comment on the matter regarding the price and reasons that could be adduced for the rising price of the US dollar along with other foreign currencies like euro and pound sterling.
But another business man who operates in the exchange transaction said, “The way and manner the price of the American dollar is rising is a serious concern to any sensible Nigerian.
“Global financial crisis or not, we need robust and genuine effective strategies by the apex bank in checking the repression of such trends aside the normal challenges in protecting the financial security of the country. Now we are selling the US dollar at N188 to N189. To answer your question, the answer is simply the failure of our regulatory agencies to fashion out reliable strategies”.
However, the Special Assistant (Media) to the CBN Governor, Mr. Isaac Okoroafor, told LEADERSHIP that the official exchange rate has ranged from N144 – N150 to US$1 since mid-January 2009.
His position has not changed from the statement he issued last Monday which stated that this is the exchange rate for about 95% of legitimate foreign exchange consumption in Nigeria.
According to him, the objective of the current foreign exchange rate policy is to conserve foreign reserves and ensure stability of the exchange rate. He also reiterated that the CBN’s measure is succeeding and that the outflow of foreign exchange has reduced by more than 50 per cent.
The bank had also disclosed that the policy will ensure that even if the global crisis lasts for the next three years, Nigeria will continue to meet all legitimate foreign exchange demand at a stable exchange rate.
“Other complementary on-going reforms will significantly affect the parallel/black market exchange rate soon. Once the global crisis abates, the Naira is expected to strengthen”, the statement added.