Speculators, Traffickers Frustrate CBN Attempt To Stabilize Naira •Non-Oil Exporters Decry Lack Of Forex •Experts Declare Parallel Market Volatile

By on April 12, 2017


Views: 300

CBN Gov. Emefiele
CBN Gov. Emefiele

The ongoing effort by the Central Bank of Nigeria to stabilize the exchange rate may not yield the desired result as speculators continue to mop up the apex bank’s dollar intervention in the parallel markets.

Already, non-oil exporters have threatened to cease exports till restrictions limiting access to their proceeds from the interbank market are removed. The interbank market is the official window through which the Central Bank of Nigeria (CBN) trades on the nation’s currency against its international counterparts.

Reports showed that continued mopping up of the apex bank’s dollar intervention by speculators has led to the naira depreciating further in value to N410 at the parallel market.

Decrying their plight, non-oil exporters stated that the CBN had made it difficult for them to access their earnings from exports at the prevailing parallel market value, thus making it a disincentive for operators, having bought raw materials from farmers at street value and added value before such products were exported. They said that their problems were compounded by competing with foreigners who are now buying commodities directly from farmers for exports. If the situation is not addressed, the goal of the apex bank’s intervention in the forex market may be futile while the desire to attract foreign direct investments due to a stable currency may not be achieved. Also, the imbalance in import-export would further weigh in on the nation’s reserves, thereby prolonging the nation’s exit from recession.

Stakeholders in the non-oil export sector alleged that the CBN’s goal of saving the naira when the economy is weak is only a short-term palliative that would further enrich speculators’ pockets rather than encouraging activities that would boost forex inflow and enhance a balance of payments from import of goods and services. The exporters, also, indicted regulatory agencies for not being up-to-date in terms of required standards of trade partners, adding that many of the trade partners exploit gaps in standardisation requirements to cheat and price commodities exported below international benchmark prices.

Despite auctioning several millions of dollars in the last few weeks, the CBN has been battling naira volatility brought on by low oil prices, which plunged the economy into a recession, even as the multiple exchange policy continues to mask the pressure the currency is under and made it difficult to attract inflows as investors struggle to price naira assets.

Unrelenting currency speculators and traffickers have continued to evolve strategies to ensure that they frustrate the Central Bank of Nigeria’s (CBN) objectives of achieving exchange rate stability and convergence in the economy.

Findings revealed that several currency speculators, who got their fingers burnt as a result of the new foreign exchange (FX) policy measures and the sustained dollar injection by the central bank since February, have continued to resist the policy measures and are devising ways to manipulate the market.

Owing to the speculative attacks on the naira, the local currency which strengthened to N385 two weeks ago on the back of fewer dollar interventions by the CBN, continued its free fall closing at N410 to the dollar, compared to N405 from the previous day.

A currency trader alleged that some currency speculators now connive with bank officials to generate fake airline tickets just to enable them access personal travel allowances.

These funds are thereafter sold on the parallel market.Also, latent demand for FX, coupled with illicit funds from public office holders and others chasing few dollars, have contributed to the wild fluctuation of the naira on the parallel market in the past few days, despite the sustained intervention by the CBN.

In addition, the anticipated devaluation of the naira in the short-term, a lot of banks have been holding back their dollar cash in order to make a kill when the local currency is devalued.

Furthermore, the sale of tickets at a discounted dollar price by some international airlines has also contributed to the surge in dollar demand observed in the market recently, as passengers have rushed to buy the greenback for their summer holidays and for their children schooling overseas.

The President, Association of Bureau de Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, confirmed that the activities of speculators and currency traffickers were having a negative effect on the market.

“We believe that there is a lot of illegal money in the economy being used to distort the market. When you have such funds that cannot pass through the banking system, if they tell you that the naira exchange rate is N500/$1, you can buy, just for you to frustrate the system.

“Most of the funds that cannot be kept in the banks have found their way into the parallel market. Also, I agree that speculators are still strategising because they have lost money and so they can’t just go away like that.

“Sometimes they (currency speculators) come up with propaganda saying that the CBN is not selling dollars to BDCs; CBN cannot sustain this policy, etc, and this kind of misinformation affects the rate,” the ABCON boss said.

Gwadabe recently blamed the depreciation of the naira on speculators’ onslaught and resistance by some banks. He urged the CBN to sponsor a bill at the National Assembly to make the naira the convertible currency in West Africa.

The Chairman, Export Group, Lagos Chamber of Commerce and Industry (LCCI), Dr. Obiora Madu, urged the CBN to revive the window for export proceeds, stating that the market prices of local commodities are higher than those of the international markets.

“We have always advocated a window for export proceeds. It was done before because exporters are not making money. The CBN should revive it as it is becoming more profitable to cut corners, with many exporters exploiting repatriation of proceeds to neighbouring African countries in order to access their dollars.

“The idea of foreigners directly sourcing commodities from the local farmers and markets is affecting commodity prices. Foreigners with soft funds are muzzling small businesses out of business. Politics will have to be right, regulation needs to come in and government needs to show commitment to its non-oil export agenda,” he added.

An analyst at Ecobank Nigeria, Kunle Ezun, who agreed that the activities of currency speculators were responsible for the volatility on the parallel market, advised the central bank to “take its mind off the parallel market.”

“It is a market it cannot control. It is an informal market. There is no way the CBN can control the naira exchange rate on the parallel market because they (CBN) does not even know the depth of that market,” he said.

However, Ezun disagreed that the central bank might devalue the naira in the short-term.

“I don’t foresee a devaluation in the short-term because the CBN has a lot of exposure on its FX futures market. Once you devalue, the strike of the FX futures would go up to mirror the new rate and would hit the CBN negatively.” 

Source cattnews

Posted 12/04/2017 10:51:37 AM




You may also like...
2017 Budget: Buhari Runs Nigeria On Deficit •Experts...

U.S. Squares Up On Two Fronts •Deploys warships...

Trump's Worrisome Woes •Beleaguered At Home •Grapples With...

Coup Scare Hits Nigeria •As APC Heats Up...

Tension Mounts On Korean Peninsula •US Tests China’s...

AC Milan Sold To Chinese Consortium


Latest News CRISIS LOOMS: NIGERIA AT ANOTHER CROSSROADS!!! •INEC CANCELS ELECTION •APC JITTERY, TO CHANGE INEC BOSS •NIGERIANS ANGRY TRADE WAR, POLITICS CLOUD WEF •U.S.- CHINA DISPUTE LINGERS •ANXIETY OVER GLOBAL ECONOMY •KEY WORLD LEADERS MISSING Trump's Worrisome Woes •Beleaguered At Home •Grapples With Angry Allies And China •Bola Ahmed Tinubu Connection 2019: PDP Reconvenes •Must Reposition To Gain Power •APC Anti-graft War Tanks Signature Beyond: The Alpha Art Gallery Muraina Akeem’s Metal-Morphosis Emefiele Dangles Fraudulent Carrot •Sets $40bn External Reserves Mark •APC Flounders On Ato Arinze: A Master Craftsman Buhari Resumes •Talks Unity And Security •Economy Remains Comatose Mohammed Targets Nigerian Brands •Wants To Change NBC Code •Desires Sponsorship For Local League APC Tramples On Entertainment •To Stop Overseas Music, Film Production •Artistes Decry Plan Blair Is In Town •Preaches Good Governance •Plans To Convert Nigerians


Most Read Ato Arinze: A Master Craftsman (1,505 views) Muraina Akeem’s Metal-Morphosis (1,044 views) Signature Beyond: The Alpha Art Gallery (807 views) Troubled APC Suffers Another Setback •National Convention doubtful •Leadership dispute worsens •National Party Secretariat in ruins (801 views) 2019: PDP Reconvenes •Must Reposition To Gain Power •APC Anti-graft War Tanks (732 views) APC Tramples On Entertainment •To Stop Overseas Music, Film Production •Artistes Decry Plan (696 views) AC Milan Sold To Chinese Consortium (686 views) Blair Is In Town •Preaches Good Governance •Plans To Convert Nigerians (669 views) Pray For Buhari!!! Pray For Nigeria!!! (665 views) Mohammed Targets Nigerian Brands •Wants To Change NBC Code •Desires Sponsorship For Local League (657 views) Biggest Fishing Festival, Argungu To Hold March 2018 •To Include Polo (639 views) Abuja Airport Ready For Use, Says NCAA (629 views)


Categories Art Business Entertainment General Personality Sports Travels



Social Media


Julius Agwu - Crazy Interview Demands