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Naira weakens to N166/$1 at parallel market

By on October 29, 2013

There seems to be no end in sight to the volatility suffered by the naira as it depreciated significantly against the dollar at the parallel market to close at N166/$1 on Friday, from N163/$1 the preceding Friday.

The parallel market, also known as the black market is the unofficial segment of the forex market. It is not under the control of the Central Bank of Nigeria (CBN) and there are indications that the huge demand for the greenback observed recently at the bureau de change (BDC) segment may have shifted to the parallel market due to the regulations of the central bank. Therefore, the naira may depreciate further at the parallel market.

THISDAY findings in Lagos Island showed that in some parallel market points, the naira went for between N166 and N167 to a dollar. But at some parallel market points visited in Apapa, Lagos, the naira was sold at N166 to a dollar.

THISDAY had reported last week that the withdrawal of the operating licences of 20 BDC firms by the CBN was putting pressure on the autonomous forex market.

However, the nation’s currency was relatively stable at other segments of the forex market. The CBN offered a total of $600 million and sold $596 million at its regulated bi-weekly Retail Dutch Auction (RDAS) where the naira depreciated slightly by 26 kobo to close at $156.07/$1 last Wednesday.

Also, while at interbank market, the naira closed at $158.81/$1 last Friday, it stood at N162/$1 at the BDC.

A source at the CBN argued that the naira may depreciate further at the parallel market due to the scarcity of the dollar as a result of recent measures introduced by the central bank.
The source explained: “There is scarcity of dollars because of some of the policies we introduced. In this era of cashless, we don’t want people to be moving around with cash, including dollar cash.

“But we don’t have control over the black market and in my opinion; the situation might get worse in the nearest future because very soon the CBN will not be selling cash to the BDCs again and what we shall be doing is to transfer directly into their respective accounts.

“The CBN is trying to reduce the amount of dollar cash in the system. We noticed that some of the dollar cash are for money laundering, financing of terrorism and we are trying to put an end to all that. But the idea is that if you need dollar cash for legal activities, you will get it once you follow the normal procedure.”

The Central Bank of Nigeria (CBN) had  on September 26 this year, withdrawn the operating licences of 20 BDC operators over allegations of money laundering activities.

The CBN Governor, Mallam Sanusi Lamido Sanusi recently said: “If someone is in money laundering, his demand for dollars is completely inelastic. He can do N180/$1, he can pay N200/$1, he can pay N250/$1 and he is not going to stop.

“Nigeria has overtaken Russia as the biggest importer of United States dollars. This country imports more US dollars in cash than any other country in the world. I am saying this because these are every day challenges we deal with in monetary policy.”

In addition to the withdrawal of the operating licences of the 20 BDCs over allegations of money laundering, the central bank’s official forex window, previous known as the Wholesale Dutch Auction System (WDAS), was suspended, while the RDAS was re-introduced.
Also, among other measures, the CBN recently directed that receipts of proceeds of international money transfers should be paid in naira.

 

 

[This Day]

One Comment

  1. Simon

    October 31, 2013 at 6:43 pm

    “Recipients of international money transfer should be paid in naira”? Is Sanusi crazy? Doesn’t he know that that will only worsen the activity of the black market? US dollars should be made available for genuine businesses. That is the only thing that would stifle the illegal forex trade. For all the talk about money laundering and terrorism genuine businesses are the majority of black market customers because they cant get foreign currencies anywhere legally!