CBN’s policy crashes dollar: Black marketers this week hit rock bottom as several interventions of the Central Bank of Nigeria (CBN) in the forex market bolstered the value of the naira, which rose to N390 to the dollar yesterday. The Naira, which also appreciated against the Pound Sterling and Euro rate, traded at N510 and N415 respectively, even as operators and analysts said they expect the trend to continue.
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The CBN had over the weeks sold dollars at the interbank and bureau de change market, clearing backlog of dollar demands and meeting forward contracts, as well as BTA/PTA, school fees and medical fees demand.
Briefing journalists on the outcome of the Monetary Policy Committee (MPC) meeting in Abuja on Tuesday, CBN governor, Godwin Emefiele said the apex bank was determined to see the convergence of rates at the foreign exchange market.
Noting that the apex bank was optimistic that the rate between the official and parallel market would converge further, he assured that the bank could sustain the policy.
According to him, currency speculators who doubt the ability of the bank to take decisions and implement the policy were taking a great risk.
Emefiele had also warned speculators to desist from stocking dollars at home because the CBN intervention would crash the price of dollar, which was already happening.
From a low of N500 to the dollar in February this year, the value of the naira had appreciated at the parallel market, as the CBN intensified its dollar sales, following a meeting with the Vice President.
Likewise the rise in the price of crude oil at the international market, coupled with increased output as soon as Niger Delta militants stopped blowing up pipelines boosted the country’s foreign exchange revenue and, consequently, the foreign reserves.
Nigeria’s foreign reserves this month crossed the $30 billion mark and is currently trending towards $31 billiion, further boosting the ability of the CBN to continue its consistent intervention.
So far, it has sold $1.7 billion dollars in forwards as well as other legitimate dollar demands through banks and BDCs.
Black market currency traders in Lagos who spoke with LEADERSHIP last night said the value of the naira had risen to N415 by afternoon and rose further to N395 by the close of business in the evening.
One of the Bureau de Change operators, simply known as Tijanni Jos, said that the development had caused operators to lose a lot of money.
According to him, operators did not envisage a quick downfall of the dollar which has caused them to buy at an expensive rate, hoping to make returns.
Jubril, a currency trader in Lagos said, “I have not been able to sell the dollars that I have with me because I bought it at N420 and now it is priced at N395. People are not buying, they are selling and I believe that the naira will go up more this week and next week”.
This was corroborated by the president of the Association of Bureau de Change Operators (ABCON), Aminu Gwadabe, who told a reporter that 90 per cent of the speculators have been burnt badly by the appreciation of the naira.
According to him, the recent steps taken by the CBN had eliminated most of the “frivolous demands and those demands that do not add value to the economy”. He added that most of them who had envisaged that the naira will continue to depreciate had been disappointed.
“People are not buying dollars anymore for now. They are waiting for a level where the CBN cannot go beyond before they demand for dollars again”, he stated.
He, however, noted that the CBN could sustain its present intervention levels considering the rising fortunes of the country.
Explaining that the interventions have been successful so far, Gwadabe said increased inflow from crude oil sales was bringing in “nothing less than $30 million everyday for the country”.
He continued: “We are saving about $13 per barrel through the difference between the benchmark and selling price of oil. The selling price is about $56/57 per barrel, while our benchmark is $40.
“This has increased our buffers and then there is the foreign exchange that is expected to come in through the various loans. If all these come into play, then the CBN will be able to sustain the interventions and meet all legitimate demand”.
Also speaking, Chief Executive of Cowry Assets Management Limited, Johnson Chukwu, said the understanding between the fiscal and monetary authorities will give ability to the central bank to continue its interventions.
Observing that the capacity of the apex bank had been limited by a low inflow of foreign investors, he said the accretion of forex from crude oil sales as well as expected inflow from multilateral loans will give the CBN the needed capacity.
“The $500 million Eurobond which the government will go back to the market to raise, the $1.3 billion from China EXIM Bank, the $1.6 billion from World Bank and then the balance of $600 million from the African Development bank”, Chukwu said.
Also speaking with LEADERSHIP yesterday, Dr. Tayo Bello commended the CBN for plugging the loopholes in the forex market which was being exploited by currency speculators who were holding the greenback before now, thereby creating artificial scarcity in the market.
He said the CBN’s move to flood the market with more forex, thereby creating a glut in the market, was unprecedented.
Bello said, ‘‘What we had before was an unprecendedted demand for forex fuelled by unprecedented corruption where people look for forex which are not being chamnnlled into productive uses but now CBN is nomlising everything”.
He also expressed hope that if the peace in the Niger Delta region of the country could be sustained, the CBN will be able to susutain its intervention in the market.
“Dollar will still sell for N250 in the few weeks to come. Currency speculators are in trouble because what happened in the stock market when the bubble burst is already happening to them. They are already committing suicide and more will still commit suicide”, Bello noted.
He enjoined Nigerians to have faith in the country, as that was the only way to get the nation’s economy out of recession.
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