The naira exchanged at N345 to the dollar in the parallel market on Monday. The exchange rate liquidity worsened thereby forcing the Central Bank of Nigeria (CBN) to devalue the official exchange rate to narrow the gap between it and the parallel market.
Meanwhile, the official rate remained at 197.50 to the dollar at the close of trading.
Traders said the black market rate had slipped as Nigerians with school and medical bills to pay abroad anticipated that CBN would stop allocating currency for such payments. The bank has not denied or confirmed any such plans.
In my own view, the central bank should address the supply side of the market by allowing oil companies and banks to sell dollar to bureau de change operators as an immediate measure to reduce pressure on the naira.
Said Aminu Gwadabe, head of the Association of Bureau de Change Operators of Nigeria.
While the Managing Director, Financial Derivatives of Nigeria Limited, Bismark Rewane, said naira devaluation is the answer to Nigeria’s economic woes.
The CBN said it sold $8 billion to bureaux de change (BDCs) in nearly two years but who are the owners of these BDCs? The issue is if you are a manufacturer and you get dollar at N197 from the CBN to import raw materials. There are two decisions to make. Manufacture the goods and sell as if you bought the at N310 to dollar because of the wide gap between the official and parallel market rates, or open a Letter of Credit and refuse to import. Then roundtrip the money and make 50 per cent outright profit.
I can tell you, there are vested interests. They pretend to be protecting and defending the naira, but in reality, they are not. In 1987, the naira depreciated by 76 per cent and by 20 per cent in 2009. But when oil prices rose, did they allow the naira to appreciate?