Naira falls to 900/$ 

By Sodiq Adelakun

The Naira fell to N900 per dollar yesterday following a report by JP Morgan that estimates Nigeria’s net FX reserves at $3.7billion, at the parallel segment of Nigeria’s foreign exchange (FX) market.

JP Morgan said that Nigeria’s FX reserves is “significantly lower than prior estimates, owing to larger-than-expected currency swaps and borrowing against existing reserves,” adding that “the foreign exchange market will remain in focus given the likely lower starting point for net FX reserves, with an overall balance of payments deficit pointing towards continued FX pressure.”

Parallel market FX dealers were on Tuesday, August 22 buying dollar at N885 while selling at N900, according to data by AbokiFX, an online platform that tracks the exchange rate on the parallel market.

Before this revelation, the naira had for the past days remained flat at N860/$ amid cooling demand pressure at the parallel segment of the market.

Nigeria’s Central Bank recently announced August 31 as the commencement date of the Price Verification System Portal (PVS) as requisite for Form ‘M’ application. The apex bank also announced the operational mechanism for Bureau De Change Operations in Nigeria.

For BDCs, the CBN said among others that the spread on buying and selling by BDC Operators shall be within an allowable limit of -2.5 per cent to +2.5 per cent of the Nigerian foreign exchange market window weighted average rate of the previous day.

This is in addition to mandatory rendition of BDC Operators statutory period reports on the Financial Institution Foreign Rendition System (FIFX).

CBN also said that from August 31, all applications for Form ‘M,’ which is the declaration of intention to import goods into Nigeria, shall be accompanied by a valid Price Verification report from the PVS portal. With the PVS, the apex bank could distinguish those who genuinely need forex and halt the crisis in the sector.

While CBN rolls out these new policies in the FX market, analysts believe that Nigeria must work towards boosting the supply side of the FX market to meet genuine demands.

During the recent Naira conference themed “The Naira: Paths to Institutional Reform and Accelerated Growth,” stakeholders noted the volatility and uncertainty that pervades the Nigerian foreign exchange scene. During the panel session titled “from fragmentation to integration: shaping a more cohesive forex market,” Aminu Gwadabe, president of the Association of the Bureau-De-Change Operators of Nigeria (ABCON), one of the panellists was of the viewpoint that the volatility in Nigeria’s foreign exchange market is not demand-driven but the excess liquidity in the market created by graft.

He provided suggestions for establishing a more integrated foreign exchange (FX) market, including, demonopolising the key players in the exchange market. He emphasised the significance of Bureau-De-Change (BDC) operators within Nigeria’s Forex market, asserting the necessity of incorporating registered BDC operators when shaping policies related to the forex market.