As schools resume for new academic session across the globe, high demand for Foreign Exchange (forex) by Nigerian parents in order to pay for their school fees abroad, has forced the local currency, the naira to a record low of 445 per US dollar at the parallel market on Monday, forex traders have said.
The naira was sold at the parallel market for 440 per dollar on Sunday and dropped further on Monday by five points to 445 as the lingering foreign exchange scarcity continued.
The local currency, which closed at 436/dollar on Thursday, eased to 435 in the early hours of Friday fell again at the close of market yesterday.
The naira had closed at 428 to the greenback on Wednesday, down from 424 on Tuesday, as lingering foreign exchange shortage weighed on the economy.
The latest declines in the naira value started on Wednesday, a day after the Central Bank of Nigeria’s Monetary Policy Committee retained the benchmark lending rate at 14 percent.
Although, forex traders have said that the current rate of the naira is not a true reflection of the market but was pushed by speculators and strong demand from parents buying dollars to pay school fees abroad are putting pressure on the Nigerian currency.
They believed that the market is being driven by speculators who are taking advantage of the poor implementation of central bank policy requiring banks to sell dollars to bureau de change operators to ease pressure in the market.
However, economic and currency analysts have said the decline in the value of the local currency against the dollar has nothing to do with the MPC decision.
At the interbank market, the naira closed at 307.79 on Friday. It closed at 307.25, 311 and 312 on Tuesday, Wednesday and Thursday respectively, according to data posted on the FMDQ OTC platform.
“There is shortage of dollar supply. Diaspora remittances have dropped. This is why you can see the rate dropping at the parallel market,” an economic analyst and Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said.
Meanwhile,the Association of Bureau De Change (BDCs) Operators of Nigeria says it foresees the naira on the path of recovery this week due to the introduction of Travelex, a licensed Forex dealer.
The President of ABCON, AlhajiAminuGwadabe, said that a licensed Forex dealer would enhance transparency in the distribution network.
Travelex, an international money transfer organisation, was officially directed by the Central Bank of Nigeria to distribute Forex to Bureaux De Change operators by Monday.
Gwadabe said that a licensed Forex dealer would enhance transparency in the distribution network.
He said that Forex distribution would be efficient and uniformed across ABCON members unlike what was obtainable in the past.
According to him, Travelex has the technology to sell Forex to about a 1,000 BDCs within a couple of hours, which is a major advantage.
He said, “Against this background, the naira is expected to be on a recovery path from Monday as the distribution of Forex to BDCs will boost liquidity in the market.
“The boosting of liquidity in the market will dampen the fears of investors and market speculators, thereby raising their confidence in the market.
“This is a purely ABCON and Travelex arrangement and has the capacity of removing the bottlenecks in the Forex distribution chain.
“Travelex has the technology to pay about 1,000 BDCs within two hours.