Stakeholders Warn CBN Over Widening Gap At Official, Parallel Markets

Bukola Idowu, By OLUSHOLA BELL

Stakeholders in the Nigerian foreign exchange market have expressed worry over the widening gap in the foreign exchange rates between the parallel and the interbank markets as this would have a negative implication for the economy.

The value of the naira at the parallel market depreciated crossing the N250 to the dollar mark on Monday for the first time in the history of the country while the Central Bank of Nigeria(CBN)’s rate appreciated to N196.97 to the dollar just as the interbank market rate stood at N198.65.

This has become a great concern to stakeholders as they believe it would create an incentive for round-tripping, making the management of the foreign exchange market vulnerable to all manner of sharp practices and corruption.

The value of the naira has been falling at the parallel market from the beginning of the year due to the slump in oil prices in the international market while the CBN has kept a firm grip on the local currency, keeping it almost fixed.

Reviewing naira movement in the parallel market, acting president of the Association of Bureau de Change Operators of Nigeria (ABCON), Aminu Gwadabe said, “The parallel market rate fell to N253 per dollar from N246 on December 3, and N222 in November, representing 22 per cent weaker than the official rate used in the interbank market, which was 198.50 in Lagos.

“The Central Bank will say they don’t care about the parallel market, but investors are looking. Why will they bring in their money at 197 or 198 when the parallel rate is 250?”

Gwadabe noted that the CBN in March fixed the official rate at N198-N199 per dollar and also restricted banks’ ability to buy dollars. In June, CBN stopped importers of about 40 items, including wheelbarrows and glass, from obtaining foreign-exchange.

“Foreign investors have criticised Nigeria’s stance and sold bonds and stocks this year on expectation of a devaluation, which would cause losses on their holdings in foreign-currency terms.

“The naira’s fall in the black market comes as the Central Bank restricts dollar supplies further to save its foreign reserves, which fell below $30 billion for the first time in four months on November 30.

“About 1,200 money changers, or 60 per cent of the total in Nigeria, were denied their weekly allocation of $30,000 from the Central Bank,” Gwadabe said.

According to him, his association has requested a crucial meeting with the Abuja-based regulator, yesterday, December 8, 2015 to address the issue.

Meanwhile, nearly half of 2,818 bureaux de change operators were denied access to the Central Bank of Nigeria’s (CBN) dollar sale last week because of incomplete documentation, weakening the naira.

Reuters quoted acting president of the Association of Bureaux De Change Operators of Nigeria (ABCON) as saying that, “We expect more dollar supply this week.”

The CBN has asked all bureaux de change operators to submit accounts showing their dollar usage at the start of each week before they can gain access to future sales, a move traders said was aimed at curbing speculation.