Oil price drop to $27 per barrel why Naira crashes to 300 against dollar

Monday’s stoppage of foreign exchange
sales to Bureau De Change operators by the Central Bank of Nigeria
failed to lift the naira on Tuesday as the currency exchanged for 300
against the United States dollar in Kano, 290 in Lagos and 292 in Abuja.
Financial experts said the naira would
decline further, while private sector operators described the move as a
welcome development.
The ban was announced on Monday, when naira trading at 285 against the dollar at the parallel market from 278 on Friday.
The Acting President, Association of
Bureau De Change Operators, Alhaji Aminu Gwadabe, told one of
correspondents in a telephone interview that the currency traded against
the greenback at 300, 290 and 292 in Kano, Lagos and Abuja a day after
the CBN announcement.

“There is cut of (dollar) supply to the
market. The BDC sub-sector has been murdered. We are not coping. The
naira is going to head northwards. There is no solution in sight,”
Gwadabe lamented.
The Head of Investment Research,
Afrinvest West Africa Limited, Mr. Ayodeji Ebo, said the stoppage of
forex sale to the BDCs meant that the CBN wanted everybody to apply to
the banks for dollars.
He stated, “But we feel the pressure now
will move from the BDCs to the parallel market. We will see significant
spike in the value of the naira at the parallel market because the
little supply to the BDCs have also helped to cushion the demand at the
parallel market.
“It will further compound or increase
the spread between the parallel market and the interbank market. So, it
will also increase round-tripping and unethical practices within the
financial system.”
On the lifting of the ban on cash
deposits into domiciliary accounts, Ebo said, “I am still sceptical
about how this will work except they are also assuring us that if you
deposit it, you can consummate business with it.”
A professor of financial economics at
the University of Uyo, Akwa Ibom State, Leo Ukpong, said, “I don’t think
the stoppage of dollar sale to the BDCs will solve the problem. The
currency will depreciate some more.
“This move will make the naira to weaken more as demand for dollar will skyrocket because of the short supply.”
Members of the organised private sector,
however, applauded the CBN for the stopping the sale of dollars to the
BDCs and lifting the ban on cash deposits into domiciliary accounts.
The President, Manufacturers Association
of Nigeria, Dr. Frank Jacobs, said industrialists had earlier kicked
against the funding of the BDCs by the central bank, adding that with
the development, the forex could be channelled towards funding the real
sector in terms of importation of raw materials.
On the removal of the restriction of
cash deposits into domiciliary accounts, Jacobs said manufacturers were
still waiting for more clarification as to how the money deposited could
be utilised by the customers.
The Director-General, the Nigerian
Association of Chambers of Commerce, Industry, Mines and Agriculture,
Mr. Emmanuel Cobham, said the forex sale ban was a welcome development.
According to him, although the BDCs are
necessary in the economy, they are licensed entities and should,
therefore, source for their own funds.
Also speaking on the matter, the
Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda
Yusuf, lauded the forex policy review, noting that it had addressed the
concerns of economic operators.
According to him, it is a source of
worry that the CBN continues to maintain its official exchange rate at
N199 to the dollar at a time of dwindling forex inflow.
“The pressure on the official window
will persist. The risk of round-tripping and distortions in the foreign
exchange market will consequently remain high,” he said.

Declaimer: Opinion expressed in comments are those of the comment writers alone and does not reflect or represent Koko Level’s.


About Admin

Advertisement, Content marketing and  sponsored post: contact : Kokobest04@gmail.com
View all posts by Admin →