Naira reverts to N490 / $
In apparent response to the sustained rise in the exchange rate in the country, the Association of Foreign Exchange Bureaus of Nigeria (ABCON) began to mobilize its members to reduce the gap between the cash and illegal market value of the dollar.
Therefore, the association has asked its members not to accumulate foreign currency, Aminu Gwadabe, president of the association, said in a text message to Bloomberg. He explained that a group of officials had checked for compliance in cities across the country.
Money market traders have revealed that traders accumulating dollars could be excluded from central bank currency auctions.
The naira, which plunged to its four-year low on Monday at N505 per dollar, gained 0.6% to N 490 yesterday in the unauthorized market, according to abokifx.com, a website that collects the data . It opened at N411.58 per dollar on the nafex window also used as the official rate by the central bank.
With inflation of nearly 18%, many people accumulate foreign currency to protect their wealth, often buying dollars from illegal traders. Demand in the parallel market distorts the exchange rate, according to the Central Bank of Nigeria, and prompted it to take steps to close the gap.
“We advise and warn our members in particular, and the public to refrain from all speculative and hoarding behavior,” Gwadabe said. Such actions “will certainly lead to a very big collateral loss,” he said.
A central bank spokesperson said the lender was taking action to block arbitrage opportunities resulting from the gap between official and parallel markets.
Executives of commercial banks also agreed to increase the supply of dollars to end users at a meeting held with Governor Godwin Emefiele last week. With the arrangement, the lenders can provide the greenback at the official rate of around N410 to N412 to reduce the demand pressure on the streets.
Nigeria has devalued its currency three times since March last year, with falling oil revenues, which account for around 90% of dollar revenues, putting pressure on external reserves.