Financial Derivatives Company has said that the increasing uncertainty in the foreign exchange market has turned the naira into a ‘banana republic’ currency.
Counterfeit nairaMeanwhile the naira on Friday appreciated to N275 per dollar at the parallel market, representing N25 appreciation when compared with the closing rate of N400 on Thursday
This halted a four day N75 depreciation of the nation’s currency in the parallel market, as the exchange rate rose steadily from N325 per dollar the previous week to N400 on Thursday due to intense demand for foreign exchange aggravated by severe scarcity of dollars.
Vanguard investigation revealed that the appreciation of the naira on Friday was due to massive sell off of dollars following a text message from the Association of Bureaux De Change Operators of Nigeria (ABCON) advising bureaux de change (BDCs) to ensure compliance with Central Bank of Nigeria (CBN) regulations and avoid being used by foreign exchange speculators to engage in hoarding of the dollar. According to a BDC operator who spoke to Vanguard on condition of anonymity, the message triggered apprehension and speculations of CBN intervention in the market to bring down the rate.
ABCON President, Alhaji Aminu Gwadabe confirmed the circulation of the text message, saying it was an attempt to ensure that its members don’t fall into the temptation of being used to engage in any form of malpractice. “We are just trying to play our role and do what we can to ensure calm and sanity in the market”.
On its part, the Financial Derivatives Company, in its bi-month bulletin issued last week, blamed the steady depreciation of the naira in the parallel market to uncertainties in the foreign exchange market. The Company said, “The CBN is resisting the idea of allowing the naira float and find its true value. The rumour about the restriction of payments on education and healthcare has led to a steep depreciation of the naira. The uncertainty in the forex market is fast feeding into the currency risk premium and thus making the naira turn into a banana republic currency.
“We expect imported inflation to impact prices in February. The foreign exchange uncertainty in the country has led to the depreciation of the naira to as low as N370 per dollar.”