money laundering and other forex infractions, the naira fell significantly against the U.S. dollar at the parallel market, yesterday.The naira crashed by about five per cent, as the weakening of the BDC operations weighed heavily on the market, raising concern about the near-term outlook of the local currency.
“We are waiting to see how effective this will be. We are also trying to speak with them. Honestly, we don’t have a position until after the meeting. If the dollar depreciates by about six per cent in 24 hours, we should be worried,” the source said. Victor Ogiemwonyi, a retired investment banker, described the decision as “in the right direction.” He argued that a revert to banks would birth a “dominant rate” while the speculators will wane out in the long run as the real users of FX emerge.“This is a move towards convergence. What is clear is that at some point, we should have a single rate. It is when we have a single rate that we can manage it. If there are multiple rates, we will end up managing the wrong end of it.
The financial expert advised the government to create an FX market where the CBN and other government machinery can buy and sell FX. He described the current CBN’s intervention at I&E window, otherwise known as the Nigerian Autonomous Foreign Exchange , as one-legged, explaining that the regulator only sells but does not buy.
“The CBN has not told us the rate, the banks will want to make a profit over the official rate, we don’t know whether they will make a decent profit or they will profiteer. Bankers were the biggest experts in round-tripping. So, we may end up in a scenario where there is scarcity and the simple economics of demand and supply tells you that where there is increase scarcity, price is likely to shoot up.
This is not the first time the Central Bank would stop the sale of FX to BDCs. In January 2016, it took a similar decision when a dollar was trading for about N270.
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