Naira hits 222.5 to the dollar at Bureau de Change - Depreciates Even More

The naira on Friday extended losses against the United States dollar at the Bureau de Change segment of the foreign exchange market as it fell to 222.5, two days after the Central Bank of Nigeria closed the Retail Dutch Auction System and Wholesale Dutch Auction System window. The currency also weakened to 200 against the dollar at the interbank market, from 199 on Thursday. The CBN had on Wednesday said all demands for foreign exchange should be channelled to the interbank market in a bid to stem round tripping, speculative demand, rent-seeking, spurious demand and inefficient use of scarce foreign exchange resources. The naira had fallen to 220 against the greenback at the BDCs on Thursday, compared to 215.5 on Wednesday. 

The President of the Association of Bureau de Change of Nigeria, Mr. Aminu Gwadabe, told our correspondent in a telephone interview that, “The naira closed at 222.5 today (Friday). The market was calm and trading was very slow.” He expressed optimism that the CBN’s action would help check speculation. Gwadabe said, “With the new merger of all the rates, we expect that it will check speculation. So, if that checks speculation, in the short-run we can see some level of stability.” The currency had on February 10 tumbled to 200 against the dollar at the interbank market as local and foreign investors continued to be apprehensive about the country’s economy, following the postponement of the general elections on February 7. There are over 2,500 BDC operators in the country. At the BDC, the process of buying dollars is less rigorous but the operators usually sell in small lots, compared with the interbank market, which can transact over $100m a day. Gwadabe had on Thursday said there was going to be a lot of competition in the interbank market because everybody would be going there. “So, to some extent, except the CBN is going to intervene heavily in the market as it said, we will find that the sources of foreign exchange to the BDCs will be narrowed again and the rate at which the BDCs sell will definitely go higher,” he said. According to FMDQ, an Over-the-Counter securities exchange and self-regulatory organisation, dealing members in the interbank market can only sell funds purchased from customers (e.g. oil companies) in the inter-bank market “The buyer in an inter-bank transaction (trade between two DMs) must be buying based on customer demands. Such funds cannot be resold to other members. “DMs shall be required to provide documentary evidence of the orders made by their customers.”

Credit: PunchNG