The effect of Tuesday’s decision of the Central Bank of Nigeria (CBN) to stop selling foreign exchange to bureau de change operators (BDCs) in the country and to stop licencing new ones has began to manifest in the parallel market on Wednesday as the value of the Naira depreciated by more than 3.3 per cent within 24 hours.
From N505 which it had been selling at the black market since the beginning of the week, the value of the Naira went down sharply by N17 to N522 to the Dollar and in some parts of the country as low as N525 to the dollar.
Currency traders say there had been increased demand for the greenback as speculators moved in to take position ahead of anticipated devaluation.
Other major currencies also appreciated against the Naira although not as much as the Dollar.
Compared to N703 which the British pounds was exchanged on Tuesday, it sold at N710 by Wednesday afternoon while the Euro sold at N600 as against N592 which it sold on Tuesday. In some places, the value of the Naira depreciated to as low as N720 per British Pounds.
Rising from the July 2021 Monetary Policy Committee (MPC) meeting on Tuesday, the CBN governor, Godwin Emefiele, had announced the immediate discontinuation of the sale of foreign exchange to BDC operators, and suspended the issuance of new licences to money changers across the country with immediate effect.
Speaking at a press conference after the meeting, Emefiele said henceforth forex would only be sold to deserving Nigerians through the commercial banks, noting that BDCs have become a conduit for illegal financial flows working with corrupt people to conduct money laundering in Nigeria.
Analysts said that the initial reaction would be scarcity of Dollars in the parallel market.
According to Head, Retail Investment, Investment Management Group at Chapel Hill Denham, Ayodeji Ebo, Dollar rate would go up and Naira will depreciate at the parallel market.
“There are alot of items that are not on the CBN list that still require funding even investment.
“The banks will not sell dollars for you to buy Eurobond. So there will be scarcity because the demand is still there,” Ebo said.
Also, head of Financial Institution Ratings at Agusto & Co, Ayokunle Olubunmi, opined that, “We expect that in the near term it will take some time for banks to be able to appropriately address the demand and the rate will actually go up. We expect that there will be further devaluation of the currency but overtime it is expected to moderate.
“So initially we expect rates to go up because all the BDC operators will be sourcing for Dollars from other sources but ultimately if they can sanitise the market and the banks can provide appropriate avenue, then we can see the rates return to normal.”
Naira May Slide As CBN Bans Forex Sale To BDCs(Opens in a new browser tab)