Naira Depreciates By N9 As Speculators, Foreigners Besiege Forex Market

The naira, yesterday, depreciated by N9 at the bureaux de change as speculators and foreigners swooped on the parallel market to mop up excess dollars.

The naira had appreciated by N35 from N245 per dollar to N210 last week, due to excess dollars in the market, occasioned by refusal of banks to allow foreign currency deposits into domiciliary accounts.

Vanguard investigations revealed that from the opening rate of N213, the parallel market exchange rate rose rapidly to close at N222 per dollar, implying N9 depreciation.

Parallel market sources confirmed to Vanguard that the depreciation was triggered by increased demand by speculators and foreigners cashing in on the sudden appreciation of the dollar last week.

In addition, there was general unwillingness to sell among foreign exchange dealers due to the belief that the sudden and sharp appreciation of the naira last week, was a flash in the pan.

Confirming this development to Vanguard, Mr. Harrison Owoh, Chief Executive Officer, H.J Trust BDC said: “Dealers are not willing to sell. They are holding their dollars because they believe the situation (appreciation) will not last. In fact, somebody told me he would rather lend me his dollars, and not sell it. So that is why the rate is going up again.”

According to Mr. Aminu Gwadabe, President, Association of Bureaux de Change Operators of Nigeria (ABCON), the depreciation today (yesterday) is driven by activities of speculators and foreigners.

He said: “The belief is that the appreciation of the naira and the policy that triggered it is not sustainable. It is believed that the gains made by naira would soon be reversed.  So while speculators are buying up, foreigners are in the market to buy dollars at cheap rate, while those who have dollars have also decided to keep it, to forestall exchange rate lose.”

Excess dollars not triggered by CBN

Meanwhile, investigations further revealed that the excess dollar in the banking system was not triggered by the CBN.

Contrary to the reports that the excess was caused by CBN’s refusal to accept dollar deposit from banks in return for credit into their foreign exchange accounts, Head of Foreign Exchange unit of a Tier 2 bank told Vanguard that the decision of the CBN was in response to the increasing volume of dollar deposit from banks for credit into their foreign accounts.

He said hitherto, banks do not take the dollars to the CBN but swap it among themselves.
He said: “Banks with surplus dollars exchange it for naira with banks with deficit. CBN was not involved. But when the volume of dollars in the system became more than what the banks entirely needed, they started taking it to the CBN to swap it for credit into their foreign accounts.

“But when the CBN observed an increasing trend in the volume of dollars banks were bringing for transfer, it decided to discontinue to the service. So, what the CBN did only aggravated it, it was not the source of the problem.”

The BVN dimension

Further investigations also revealed that the excess dollars in the system, estimated at $1 billion, might not be unconnected with the CBN directive to BDCs that they must request for Biometric Verification Number (BVN) for all their foreign exchange transactions.

BDC and banking sources told Vanguard that the directive, which takes effect from today, prompted a rush of dollar deposit into domiciliary accounts by people who do not want foreign exchange transactions traced to them.

With the BVN as a requirement, the CBN would be able to trace and identify who is buying foreign exchange from BDCs or who is selling to them. (Vanguard)
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