CBN Measures Responsible Naira Crash at Parallel Market

Attempts by the Central Bank of Nigeria (CBN) to stabilise the Naira may have started yielding positive results, as the “first test-run” of the measures has hit the speculators.

The Guardian reported yesterday that sources at the apex bank said that the deployment of a number of measures by the institution had proved that turning the tide in the forex market is not impossible, especially with the “severe punishment suffered by currency hoarders and speculators” on Wednesday.

It will be recalled that the CBN had said that speculators were behind the market bubble, which has seen the Naira crashing to an all-time low of N400 to the dollar.

The naira’s exchange rate to the dollar had on Wednesday assumed multiple pricing trend at various centres across the country, with the lowest price at N220 to the dollar, while the highest was N300.

But with the return of speculators to mop up “cheap” dollar at the parallel market yesterday, the exchange rate of the naira to the dollar immediately rose to N330.

The acting President of the Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadabe, said: “Hoarding and speculative activities have returned to the market almost immediately, pushing down the naira’s value again.”

Also, a currency trader said “many people have been asking to buy the dollar today (yesterday), while not many people are coming to sell to us.”

Analysts said the sudden drop was a failed expectation of devaluation, as the Federal Government and the CBN unanimously agreed to resist the pressure, mostly from foreign portfolio investors and their local counterparts.

The Executive Director, Finance, BGL Capital, Femi Ademola, said the recent appreciation may have been response to the persistent advice of the International Monetary Fund (IMF) for the country to adopt a floating exchange rate policy.

By the policy, CBN would remove the peg on the exchange rate, but intervene in the critical sectors of the economy, which would end the struggle for the foreign exchange, as banks would begin to sell at rates determined by market demand.