Financial analysts have attributed the appreciation of the naira at the foreign exchange market to forex intervention by the Central Bank of Nigeria (CBN), including the payment of forex backlogs and the commencement of retail sales of dollars to banks and Bureau De Change operators.
The exchange rate fell below N1,400/$1 in the parallel market after closing at N1,431/$1 on Friday, with the referenced NAFEX rate at N1,382/$1.
The Central Bank of Nigeria on Monday, March 25 issued a circular to Bureau De Change operators (BDCs), informing them that it has sold $10,000 to each BDC at a rate of N1,251/$1.
Each BDC, according to the circular, is instructed to sell the dollars to eligible customers at a rate not exceeding 1.5 per cent above the purchase price. This suggests BDC are not expected to sell above N1,269/$1.
One of the analysts, Kalu Aja said the inflow at the official market had improved by 47.2 per cent week on week to $1.5 billion from the $1 billion inflow recorded the previous week. Similarly, the value of the naira at the parallel market had improved by 6.7 per cent to sell at N1,495 to the dollar.
“This is a band-aid; the CBN is attempting to fix a problem it can’t fix without a huge war chest of FX reserves. The long-term fix is to export”, he wrote.
“By celebrating the “strong naira” via the sale of Forex to BDCs, the message being sent is that the nation is at a net positive inflow of forex (current account surplus).
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“In effect, we are celebrating whitened fiscal sepulchres, which indeed appear beautiful outward but are full of unproductive high-cost defence of the Naira”.
On Monday, the Naira exchanged at N1,360 and N1,408.04 per USD at both parallel and official foreign exchange markets.
Also, President, Association of Bureau De Change of Nigeria, Aminu Gwadabe, called on the CBN to sustain the tempo, noting that clearing Forex backlogs by the apex bank has a massive effect on the naira, which improved its prospects against major currencies.
“We have also seen how they took the bold decision to reinstate the BDCs window to deepen the market, which has broken the camel’s back. As we speak, the exchange rate of the naira to the United States dollar is awesome. It’s reassuring and shows that the CBN has the muscles and arsenal to protect the value of the naira,” he added.