The regulator’s plan to strangle the illegal market is not working.
- The naira had plunged to another high on Friday in the unlicensed market.
- The central bank wants to stabilize the currency, trading at 545 naira to the dollar.
- Individuals and businesses have to rely on the parallel market for their foreign exchange needs because the central bank is rationing dollars.
Nigeria’s central bank said it was investigating currency transactions of lenders operating in the country.
Following “recent events in the market”, the Central Bank of Nigeria “would like to remind banks to refrain from any form of currency embezzlement,” the regulator said in a statement on Friday. Any lender “found guilty of ongoing investigations” could have their foreign exchange licenses suspended for at least a year, “he said.
The naira had plunged to another high on Friday in the unauthorized market, defying the central bank’s efforts to stabilize the currency, trading at 545 naira to the dollar according to Abokifx, an online platform that tracks the data. This is about a 33% deviation from the official spot rate of around 411 naira to the dollar.
Individuals and businesses have to rely on the parallel market for their foreign exchange needs because the central bank is rationing dollars. The regulator’s plan to strangle the illegal market – by banning sales to silver traders to reprimand people who profit from arbitrage – is not working and dealers are speculating that the currency will weaken further.
“Central bank capital controls have forced some of the demand into the parallel market,” said Omotola Abimbola, analyst at Lagos-based investment bank Chapel Hill Denham. Nigeria’s proposal to sell foreign bonds and the influx of Special Drawing Rights from the International Monetary Fund offer the central bank “a window of opportunity” to improve supply and end arbitrage, he said. -he declares.
A central bank spokesperson did not respond to multiple calls and a text requesting comment.
Even the increase in Nigeria’s foreign exchange reserves, which reached $ 34.7 billion on Thursday, the highest in four months, is not helping.
“We are seeing a lot of pressure from people with urgent needs like tuition abroad and treatment abroad,” said Yahaya Bello, a money changer in Abuja. “The demand for dollars is very high right now and it is not available both in the bank and in our market.