CBN Claims Responsibility For Parallel Market Crash

Dollar rebounds, hits N330 in the parallel market.

There are strong indications that the efforts of the Central Bank of Nigeria (CBN) to stabilise the Naira may have started yielding positive results, as the “first test-run” of the measures has hit the speculators.

Top sources at the apex bank who pleaded anonymity, yesterday, said that the deployment of a number of measures by the institution had proved that turning the tide in the forex market is not impossible, especially with the “severe punishment suffered by currency hoarders and speculators” on Wednesday.

It will be recalled that the CBN had said that speculators were behind the market burble, which made a mince-meat of the Naira, sending it crashing to an all-time low of N400 to the dollar.

A source said even though the rates at the parallel market may fall again as speculators may persist, they will only be “gambling” with what is left of Wednesday’s loss, which they will eventually lose with further “strike” from the plans.

The naira’s exchange rate to the dollar had on Wednesday assumed multiple pricing trends at various centres across the country, with the lowest price at N220 to the dollar, while the highest was N300.

“Some parallel market operators revealed that they bought from sellers at the rate of N272 and sold at N295. A good number of the sellers who had suffered huge losses confessed that they had bought at the rate of N380 hoping to sell at N400 before the sudden turn in fortunes,” one of the officials said.

But with the return of speculators to mop up “cheap” dollar at the parallel market yesterday, the exchange rate of the naira to the dollar immediately rose to N330.

The acting President of the Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadabe, said: “Hoarding and speculative activities have returned to the market almost immediately, pushing down the naira’s value again.”

Also, a currency trader said “many people have been asking to buy the dollar today (yesterday), while not many people are coming to sell to us.”

Analysts said the sudden drop was a failed expectation of devaluation, as the Federal Government and the CBN unanimously agreed to resist the pressure, mostly from foreign portfolio investors and their local counterparts.

The Executive Director, Finance, BGL Capital, Femi Ademola, said the recent appreciation may have been response to the persistent advice of the International Monetary Fund (IMF) for the country to adopt a floating exchange rate policy.

By the policy, CBN would remove the peg on the exchange rate, but intervene in the critical sectors of the economy, which would end the struggle for the foreign exchange, as banks would begin to sell at rates determined by market demand.

Read this for more understanding of the Dollar matter in Nigeria.

This was an article by Aufbauh on Nairaland about the real cause of rise in Nigeria

DOLLAR = N197

Please let me explain to those of us who don't understand Economic terms. Dollar has not increased since Buhari became president

1. Dollar is not our currency so dollar should not be our business

2. Our problem is not d government but

our problem is our importers and consumers

3. Naira has remained at 197 naira to 1 dollar since Buhari became president

4. Buhari has promised not to devalue the Naira and he has maintained that promise

5. Both at CBN and at interbank rates,

dollar has remained 197

6. However because we are too lazy to produce what we use in Nigeria we import even toothpicks and matches

7. Buhari does not like d importation of luxury goods because luxury goods is d reason for most corruption, that is why he banned 41 products from having access to forex

8. However when Nigerian importers insisted on importing those 41

products, FG asked them to find their dollar at d BDCs parallel market also known as black market

9. And to discourage the pressure Nigerians are mounting on the Naira just to get dollars for importation, CBN banned DMBs from selling dollars to BDCs

10. To survive the pressure of excess

dollar demands, BDCs resorted to sourcing for dollars from neighbouring countries through illicit money laundering routes

11. Because of the risks faced by BDCs to source for dollars, and because of the increase in demand for dollars by importers because China just resumed from their business holidays, BDCs keep increasing the price at which they exchange dollars to naira and now it is 400 Naira to 1 dollars

12. However that does not mean

that govt has changed the exchange rate because if our genuine importers go to CBN and fill Form M to import raw materials for local production, they will get dollars at 197 naira each

13. So the problem is that we love to consume luxury foreign products yet we are too lazy to manufacture them here.

14. For example u will see a dull girl using

iPhone 5 without even knowing simple physics and computer engineering part of how that phone was produced

15. I want Buhari to ban every foreign

product from Nigeria until Nigerians learn to produce and use Made in Nigeria products

16. Let us stop complaining about dollar as if dollar has become Nigeria's currency

17. It is even bad enough that most of those complaining about the high exchange rate of dollar do not have 1 single dollar in their purse.

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