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| Naira Struggles Despite CBN Efforts, Hits 1,510/$ |
Despite a series of reforms and interventions by the Central Bank of Nigeria (CBN), the naira had recently strengthened against the dollar, even trading below N1,000.
The naira's depreciation persisted over the weekend, with the currency trading at N1,510 to a dollar in the parallel market and 1,466.31 in the official market. The dollar-to-naira exchange rate rose by N40 between Thursday and Friday, having previously closed at N1,426 to a dollar, according to the National Autonomous Foreign Exchange Market (NAFEM), the official exchange market.
Despite a series of reforms and interventions by the Central Bank of Nigeria (CBN), the naira had recently strengthened against the dollar, even trading below N1,000.
The CBN had also injected dollars into the Bureau De Change (BDC) operators to enhance market liquidity.
On Friday morning, the dollar was valued at N1,450, but it closed the day at N1,510 in the black market.
A Bureau De Change operator explained, "We've witnessed increased demand recently, which is driving the rate higher. There's a noticeable shortage of dollar supply, contributing to the increase."
Daily Trust on Sunday reported that the CBN consistently provided dollars to registered BDC operators through the Association of Bureau De Change Operators of Nigeria (ABCON).
On April 23, 2024, the CBN sold dollars at a discounted rate of N1,021 per dollar, marking the second time in the month and the fourth in 2024, aiming to stabilize the naira.
In February 2024, the CBN announced the sale of $20,000 to each BDC at the rate of N1,301/$. Later, the allocation was halved, and foreign exchange was sold at N1,251/$1.
Other CBN reforms included clearing foreign exchange backlogs, addressing airlines' trapped funds, and cracking down on unregistered BDC operators.
Despite these efforts, the naira remains the world's worst-performing currency over the last month, according to a Bloomberg report.
BDCs Report Dollar Scarcity, Call for Amnesty for Currency Hoarders
Speaking to Daily Trust on Sunday, ABCON President Aminu Gwadabe expressed concern that recent CBN reforms and interventions were being reversed.
He confirmed that the exchange rate was N1,490 yesterday and attributed the depreciation to inadequate dollar supply.
"The real issue remains liquidity. The dollar scarcity and financial system dollarization are worrisome. Inflation is eroding the naira's value, leading some to believe it's better to buy dollars than hold onto the naira," he stated.
Gwadabe called for amnesty for individuals hoarding foreign currencies at home.
"We need amnesty. Many people still have dollars stashed away. It's a crisis. Voluntary compliance is essential beyond strict regulations. Overregulation hinders effective compliance. Those with dollars at home should be granted amnesty to improve liquidity," he emphasized.
Gwadabe also urged the CBN to diversify supply channels for BDC operators, especially through the autonomous window, rather than relying solely on direct supply from the central bank.
He added, "While foreign reserves are rising, it's unfortunate that the gains achieved have been reversed. Some naysayers predicted a rate of N3,000 to a dollar."
Experts Propose Solutions
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, attributed the naira crisis to supply and demand imbalances.
He emphasized that as long as demand exceeds supply, the crisis will persist.
Yusuf, a former director-general of the Lagos Chamber of Commerce and Industry (LCCI), advocated for a framework to manage exchange rate volatility, even if it stabilizes around N1,500.
"We need confidence that this situation won't change significantly in the next three months," he asserted.
He also highlighted the importance of Nigeria ramping up oil production to capitalize on current oil prices.
Economist Dr. Oluseye Ajuwon suggested that the CBN trace the source of foreign currency to monitor illicit inflows.
"It's purely a supply and demand issue. Once demand surpasses supply, the price will continue to depreciate. The CBN should trace money origins and destinations. Current interventions only scratch the surface; they don't address the real issue," he concluded.
