Naira Exchanges at N445 to a Dollar Amid Forex Scarcity

• Naira Exchanges at N445 to a Dollar Amid Forex Scarcity

Low dollar liquidity has started impacting the value of the Nigerian Naira, according to Bureau de Change Operators.

The Central Bank of Nigeria had announced the resumption of forex sales to small and medium businesses and parents looking to pay their children tuition fees abroad.

However, the apex bank suspended sales of dollars to the Bureau De Change operators in the country until airlines resume operations.

This, the Association of Bureau De Change Operators of Nigeria said is responsible for a jump in forex rate this week.

Alhaji Aminu Gwadabe, the President, Association of Bureau De Change Operators of Nigeria, said, “The extension of airport lockdown as well as the sale of forex to the BDCs pending when air travels resume has impacted the naira negatively from N425/$ to $445/$ in the parallel market.

“However, the assurances of the CBN governor to foreign investors on ease of exit have helped to flatten the curve at N445/$ without any sign of further depreciation at the close of business today.

“The persistent dollar scarcity with shrinking liquidity in the market is one of the major unintended consequences of the shutdown of the BDCs window.”

This may not be unconnected to the falling foreign reserves and weak revenue generation due to the low oil prices.

It should be recalled that the apex bank had announced on Sunday that it would devote available foreign exchange to strategic importation or service obligations.

A strategy to further manage limited foreign reserves as the nation grapples with the negative impact of COVID-19 and low fiscal buffer.

But with the Naira trading at N445 to a US dollar on the parallel market, the exchange rate of the local currency may slide to N600 per US dollar at the non-deliverable fx futures market.

Accordingly, the prices of goods and inflation will surge given that Nigeria is largely an import-dependent economy.

Low dollar liquidity amid high demand by foreign investors looking to move their funds oversea will impede the central bank from effectively supporting the Naira at the foreign exchange market.