The Naira seems to have entered a free fall mode against the dollar on the parallel market, as the local currency further fell to N495/$1 yesterday from N487 per dollar on Wednesday. It had exchanged for N484/$1 at the weekend. Data obtained from “Abokifx,” a website that tracks forex rates on the parallel market showed that although trading had opened earlier in yesterday with the naira at N487/$1, it depreciated against the greenback to close at N495/$1.
Significantly, the naira, which until this week was relatively stable at the Investors and Exporters’ (I&E) window , has also weakened in that segment of the forex market as it yesterday exchanged at N393.25 per dollar from N388.15/$1 earlier in the day.
The naira has been under pressure on the parallel market since the beginning of the year, due to foreign exchange scarcity occasioned by the slump in the price of oil( the commodity that accounts for about 90 per cent of Nigeria’s export earnings).
However, after rebounding from N477 per dollar to N440/$1 in early September, following an announcement by the Central Bank of Nigeria (CBN) that it would resume the sale of dollars to Bureaux De Change (BDCs) on September 7, the naira gradually weakened to between N460/$1 and N463 per dollar on the parallel market.
The CBN had in March suspended its weekly sale of forex to the BDCs due to the suspension of international flights and other coronavirus containment measures announced by the Federal Government. According to analysts, the yearly Christmas season import bill pressure, which usually starts around this time of the year, is having a more devastating impact on the naira than usual currently, due to a surge a demand for dollars on the parallel market.
A forex dealer, who did not want to be named, told New Telegraph that despite the CBN’s interventions in the official forex window, only very few importers were able to access dollars, thus pushing them to the parallel market and increasing demand for forex in that segment of the market. The apex bank recently relaxed its earlier policy on banning third parties from having access to foreign exchange routed through Form M. During the post Monetary Policy Committee (MPC) meeting media briefing on Tuesday, CBN Governor, Mr. Godwin Emefiele, had said he was disappointed that some otherwise knowledgeable analysts continued to refer to the parallel market rate as if it is the exchange rate of the naira. According to him, the parallel market is a tainted market where illegal foreign exchange transactions, which include sourcing of forex cash for purposes of offering bribes and other corrupt activities, take place.
Pointing out that the parallel market is no more than 5 per cent of the forex market, Emefiele said that Nigeria’s official exchange rate should not be determined by the rate in that market. He said: “And indeed, I heard some analysts talking about the parallel market saying that exchange rate is at N480.
I want to say this; that it is unfortunate and really unfair that even analysts who are supposed to know will play with numbers and begin to determine the exchange rate of our currency using parallel market rate.
“For the information of everybody, parallel market, as far as we know it and the data that we have, is a shallow market in Nigeria with no more than 5 per cent of market share. Parallel market and quote me is a tainted market in Nigeria, where people who desire to deal in illegal foreign exchange transactions, including sourcing of FX cash for purposes of offering bribes, corruption, that is where they deal. “And that is where people who are supposed to understand the implication of these on the economic activities on our country begin to go to television and begin to say our exchange rate is N480. This very unfortunate,” he added.