Forex rationing puts pressure on the parallel market rate

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Naira

CBN adjusts spot rate to N373 / $

By Babajide Komolafe

The dwindling fortunes of the Naira against the dollar in the parallel market are expected to persist this month, with the exchange rate rising to N 480 to the dollar by the end of the month.

Last week, the Naira depreciated another 50 kobo in the parallel market as demand for dollars intensified amid insufficient supply. According to naijabdcs.com, the live exchange rate platform of the Association of Bureaux De Change Operators of Nigeria (ABCON), the parallel market exchange rate rose to N473 per dollar last week, from N472, 5 per dollar the week before.

As a result, the Naira has lost 25% or 97 N of its value against the dollar since March 26, when the Central Bank of Nigeria (CBN) suspended sales in dollars to Currency Exchange Bureaus (BDC) operators. .

In addition, the CBN depreciated the naira in the official spot market, adjusting the spot exchange rate to N373 per dollar from N361 per dollar, resulting in a depreciation of N12.

The Naira, however, appreciated N 2.50 at the Investor and Exporter (I&E) window as the indicative exchange rate fell to N 386 to the dollar last week from N 389.5 the week before.

Bismarck Rewane, Managing Director of Financial Derivatives Company Limited, however, predicted that the decline in local currency fortunes in the parallel market will worsen this month and the naira will depreciate to N 480 per dollar in the parallel market. by the end of the month. due to the continued failure of the CBN to meet the demand for business dollars.

Speaking at the Lagos Business School monthly breakfast presentation, Rewane noted that the CBN has stepped up foreign currency rationing in its attempt to preserve the country’s external reserve, which stands at $ 35.678 billion. dollars on Thursday, August 6 against 35.877 billion dollars on Thursday, July 30, or $ 199 million. drop from week to week.

He said: “The shortage of foreign exchange increases demand in other markets, especially in the parallel market. Companies received about 15% of their demand for dollars, while the balance of 85% came from the parallel market and the undeliverable futures market, ”he said.

Noting that exchange rate pressures will increase as the easing of the lockdown intensifies, Rewane predicted that the multiple exchange rate regime would persist until 2021, while the country’s external reserves would decline further to reach. $ 34 billion by the end of August.

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