The naira on Monday weakened to new low of N527 to dollar in the parallel market. The local currency position represents N3 depreciation from N524 to dollar it closed last week.
The naira is N5 weaker than N522 to dollar it exchanged on July 28, a day after the Central Bank of Nigeria (CBN) stopped weekly dollar sales to Bureaux De Change (BDCs).
A check on the CBN website showed that the local currency remains stable at the official market where its exchanges at N410.29 to dollar.
The official market rate represents three kobo depreciation from last week’s close of N410.26 to dollar.
The CBN stoppage of dollar sales to BDCs had pushed manufacturers and foreign exchange end-users to the official market where backlog of unmet foreign exchange demand continued to soar. The BDCs are now sourcing dollars from autonomous sources, usually at higher prices.
Market dealers and analysts said the policy shift could increase hoarding of scarce dollars in the hands of very few forex dealers.
In emailed report to investors, Managing Managing, Financial Derivatives Company Limited, Bismarck Rewane, said channelling dollars to commercial banks will not solve the problem of market volatility.
For him, the banks also have challenges with keeping with set foreign exchange trading guidelines.
“The question that arises is: What is the optimal solution? Administrative controls or market pricing? The interim solution of substituting BDCs with banks is hardly going to achieve much. You are virtually handing over the yam barns to goats to secure. In the end, there will be no yams nor goats,” he said.
According to Rewane, one of the options is to simultaneously allow banks to retail dollars as they have done in the past and make BDCs engage in retailing same but at a buy rate different from today’s subsidised rate, that is, buy dollars from the CBN at the parallel market rate less a N10 premium.
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