The naira yesterday exchanged at N345
to the dollar in the parallel market. The exchange rate volatility
worsened thereby forcing the Central Bank of Nigeria (CBN) to devalue
the official exchange rate to narrow the gap between it and the parallel
market.
The local currency eased 1.47 per cent from Friday’s close of 340 to
the dollar, while the official rate remained at
197.50 to the dollar at
the close of trading yesterday.
Traders said the black market rate had slipped as Nigerians with
school and medical bills to pay abroad anticipated the CBN would stop
allocating currency for such payments. The bank has not denied or
confirmed any such plans.
Tumbling global oil prices have battered Nigeria’s crude exporter,
with foreign exchange reserves down to an 11-year low at $27.85 billion
by February 11.
Nigeria’s government is concerned that further depreciation will hurt
poor Nigerians, but the bank’s refusal to revise the pegged exchange
rate has widened a chasm between official rates and the parallel market.
“In my own view, the central bank should address the supply side of
the market by allowing oil companies and banks to sell dollar to bureau
de change operators as an immediate measure to reduce pressure on the
naira,” said Aminu Gwadabe, head of the Association of Bureau de Change
Operators of Nigeria.
Managing Director, Financial Derivatives of Nigeria Limited, Bismark
Rewane, said naira devaluation is the answer to Nigeria’s economic woes.
The economist said there is a big difference between economic drama and
reality adding that people denying the need for devaluation are same
people that keep stealing from the people.
He said those who want the naira not to be devalued should remember
that it is all about competitiveness adding that the local currency can
also appreciate if things are done rightly.
Rewane said that in the last 10 years, Western Union, Thomas Cook and
others were bring dollars to the country. “The CBN said it sold $8
billion to bureaux de change (BDCs) in nearly two years but who are the
owners of these BDCs? The issue is if you are a manufacturer and you get
dollar at N197 from the CBN to import raw materials. There are two
decisions to make. Manufacture the goods and sell as if you bought the
at N310 to dollar because of the wide gap between the official and
parallel market rates, or open a Letter of Credit and refuse to import.
Then roundtrip the money and make 50 per cent outright profit,” he said.
He said devaluation will solve such problem because it will reduce
the widening gap between the official and parallel market rates. He said
many of the people asking government not to devalue the naira is
because they want to abuse and steal the fund, pretending to be
protecting the naira.
“I can tell you, there are vested interests. They pretend to be
protecting and defending the naira, but in reality, they are not. In
1987, the naira depreciated by 76 per cent and by 20 per cent in 2009.
But when oil prices rose, did they allow the naira to appreciate?”
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