The naira fell to 360 against the United States dollar at the parallel market on Wednesday over serious scarcity of forex as the supply of the greenback waned at the foreign exchange market.
The scarcity, according to National Daily investigation is linked to inadequate liquidity in the forex market, making the naira to depreciate very fast. Currency analysts and experts said there was a need for the Central Bank of Nigeria to address liquidity issue at the interbank market in order to resolve the matter.
“It all comes back to liquidity that is what drives the market, the Chief Executive Officer, Nigeria, Renaissance Capital, a United Kingdom-based investment bank, Mr. Temi Popoola, said.
“Liquidity currently comes from only one source, the CBN. We can also get liquidity into the market through remittances, portfolio investors and foreign direct Investment. How do we do it? The answer is the price level. There is a price level that will drive liquidity into the market.”
Corroborating this view, a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said, “It is basically one thing – the supply side; activities are still currently low at the interbank market
“Nothing much is really happening on the supply side of the market. Liquidity issue is still there. We actually felt that foreign investors should have been coming in by now.”
President, Association of Bureau De Change Operators, Aminu Gwadabe, said the volatility at the parallel market this week could be traced to the activities of currency speculators.
The ABCON president, however, said supply was still an issue, noting that currency speculators were taking advantage of the supply gap at the interbank market to fuel spike in the exchange rate at the parallel market.
“As much as possible, we want to be patriotic and work with the regulators as BDC operators. The parallel market operators are happy with this spike. It is high time the CBN checkmated this spike. The BDCs can be empowered by giving them access to the Diaspora remittances or the CBN window.”