Our Naira Is Falling Dangerously As Dollar Supply Dries Up

These are definitely not interesting times for Nigeria’s economy, particularly the national currency, the naira, no thanks to the depleting reserves and the subsequent banning of importers of 41 items from the foreign exchange market by the Central Bank of Nigeria.

Barely 10 days after the CBN stopped forex sale to importers of rice, textile and 39 other items, the naira on Wednesday crashed to 230 against the United States dollar at the parallel market, down from 218 recorded on June 23 when the new forex rule was introduced.

The policy, which has pushed huge forex demand from the interbank (official) market to the parallel (black) market and the Bureau de Change retail segment, has led to artificial scarcity of dollar and other major foreign currencies as operators now hoard them in anticipation of higher prices.

The naira had fallen to 220, 223, 226.5 and 228 against the dollar in the past one week.

Black market and BDC operators, however, told Punch that serious dollar liquidity squeeze was already hitting the market and operators were no longer in possession of huge stock of forex to meet rising demands, especially from the importers of the banned items.

Using the CBN figures, analysts had estimated that about $5.7bn quarterly forex demand was being transferred from the official interbank market to the black market.

“The situation is getting critical now. There is serious dollar liquidity squeeze in the market now. The demand is overwhelming and both the black market and the BDC segment can no longer meet the demand,” a black market operator said on Wednesday.

“The market is very volatile now as a result of the restrictions placed on about 41 items by the central bank. Most importers are now patronising the parallel market to source their dollars,” the head of a BDC, Mr. Harrison Owoh, told Reuters on Wednesday.

Hence, the Association of Bureau De Change Operators has written to the CBN asking it to intervene in the dollar scarcity in the parallel market and the BDC segment to save the naira from crashing.