As the Nigerian naira continues its downward trajectory, sparking concerns over currency speculation and round-tripping, the acting Governor of the Central Bank of Nigeria (CBN), Mr. Folashodun Shonubi, has issued a stern warning that the government will take firm action against those involved in underhand practices within the foreign exchange market.
The naira’s value depreciated both in the official Investors and Exporters’ (I&E) window and the parallel market, driving the arbitrage gap to a staggering N206/$1.
This significant discrepancy has given rise to round-tripping, a situation that attracted attention on the international stage as President Bola Ahmed Tinubu shared insights on the suspended Governor of the Central Bank, Godwin Emefiele’s arrest during an interaction in Paris.
The dual exchange rate reality presents a situation where dealers buy the U.S. dollar at N744 to a dollar from the official window, only to resell it at the black market for N206 spread. This wide disparity encourages rent-seeking and opportunistic profit-making.
The president labeled the financial system “rotten” under Emefiele’s tenure, expressing a commitment to address the situation. He indicated that “something is being done about that.”
This week saw the naira weaken by N20 to N950/$1 in the parallel market, down from the previous N930/$1. The official I&E window, commencing trading at N740/$1, concluded the day at N744/$1 after a marginal depreciation of N4.
Shonubi stated, “Mr. President is very concerned about some of the goings on in the foreign exchange market.
“One of the things we discussed is what could be done to stabilise and what could be done to improve the liquidity in the market and also the goings on in the various other markets, including the parallel market.
“He (Tinubu) is concerned about its impact on the average person, since, unfortunately, a lot of activities that we do, which are purely local, are still referenced to exchange rates in the parallel market.
“We’ve discussed and I’ve shared with him what we’re doing to improve supply.”
The acting CBN governor explained further, “If you look at the official market, you’ll find that market has been fairly stable and the spread of the difference has not fluctuated as much.
“We do not believe that the changes going on in the parallel market are driven by pure economic demand and supply, but by speculative demand from people.
“Some of the plans and strategies, which I’m not at liberty to share with you, means sooner rather than later, the speculators should be careful because we believe the things we’re doing, when they come to fruition, may result in significant losses to them.
“But my presence here is more about the concerns the president has and he needs to know that we are doing something about it, assurances of which I have given him totally.”
He added, “So I hope this helps. We are looking at it and we’re doing things, which will significantly impact the market in a few days’ time and we will all see it.
“The intention is to ensure the environment operates at a level that’s more efficient, but also that is very reasonable and does not have a negative impact, to the best that we can, on the life of the average person.”
