Naira depreciates to N270/Dollar in parallel market! We are on it

The Naira Wednesday depreciated further to
N270 per dollar at the parallel market, following
reduction of dollar sales to bureaux de change
(BDCs) by the Central Bank of Nigeria (CBN).
Vanguard Investigation revealed that from N260
per dollar at the close of business on Tuesday,
the parallel market exchange rate rose sharply to
N270 per dollar in Lagos, indicating N10
depreciation.
But in Abuja, the parallel market exchange rate
rose from N262 per dollar to close at N273 per
dollar, indicating N11 depreciation.
BDC operators, who confirmed this development
to Vanguard, said that the sharp depreciation
was due to further reduction in the weekly dollar
sales by the CBN.
President, Association of Bureaux De Change
Operators of Nigeria (ABCON), Alhaji Aminu
Gwadabe to Vanguard that though the CBN
increase the number of BDCs it sold dollars to
from 1,170 last week to 2,270 this week, it
however reduced the amount of dollars sold to
each BDC by 60 percent from $30,000 to
$10,000.
According to Mr. Harrison Owoh, Chief Executive
Officer, H.J Trust BDC, the decision of the CBN
aggravated the demand situation in the market.
''There is huge volume of unsatisfied demand
in the market. We had to turn down lots of
request for dollars because of there is no dollars
to sell to them.''He told Vanguard.
An Abuja based BDC operator, who spoke on
condition of anonymity said.. ''The dollar is
selling at N273 in Abuja this evening. It was
N262 in the morning. We are surprised at the
pace of depreciation, because we can't explain
why it just went up by such margin in one day.''
Commenting on this development, Director,
Corporate Communications, Central Bank of
Nigeria (CBN), Ibrahim Mu'azu said that the
reduction in dollar sales to BDCs is part of the
demand management of the CBN in the foreign
exchange market. He said that the depreciation
of the naira to N270 per dollar is a speculative
reaction to the development. ''The rate is not
sustainable.'' He said.
''This is because there are still other windows
for end users to buy dollars at lower rate. They
can buy dollars at the official rate from the
deposit money banks, and from Travelex inside
the airport. So by the time people know about
these alternatives, the reaction in the parallel
market, and the exchange rate will calm down.''
Further investigations reveal that the naira also
depreciated heavily against the British Pounds.
From N365 per Pounds at the close of business
last week, the parallel market exchange rate rose
sharply to N385 per Pounds at the close of
business yesterday.
In addition to the reduction in dollar sales by
CBN, foreign exchange supply from autonomous
sources is thinning due to hording. ''People are
hording their dollars in anticipation of further
depreciation of the naira, while some are
demanding higher exchange rate before they
sell.'' Said the Abuja based BDC operator.
The anticipation of further depreciation is been
driven by speculations that the reduction in
dollar sales by the CBN might be followed by
outright cancellation of the weekly dollar sales
programme which was introduced in 2006. ''The
naira will hit N300 per dollar, if the CBN cancels
the weekly dollar sales, projected the Abuja BDC
operator.''
Recall that last week the CBN introduced revised
guidelines for BDCs which tightened regulation
of BDC operations. Among other things the apex
bank banned BDCs from having branch directing
them to close all their branches within 90 days.
The new guidelines also banned BDCs from
having business relationship with street currency
hawkers, saying it would revoke the operating
license of any BDC with business relationship
with street currency hawkers.