Panic Buying Weakens Naira to N340/$1 on Parallel Market…
Following speculations that the Central Bank of Nigeria (CBN) may soon exclude payments of school fees from its lists of items eligible for foreign exchange at the official market, panic buying of dollars at the parallel market saw the naira falling to a new historic low yesterday.
Owing to this, the naira fell sharply to N340 to a dollar, compared to the N321 at which it sold on Friday. A currency dealer at Broad Street, Lagos, who confirmed this in a chat with THISDAY, attributed the development to huge demand for dollar since last Thursday.
The Group Managing Director/ Chief Executive, Access Bank Plc, Mr. Herbert Wigwe, had while briefing journalists at the end of the Bankers’ Committee in Abuja last week, said the committee discussed ways of ensuring that the demand for foreign exchange for the purpose of paying school fees abroad, among others, does not crowd out real sector investments.
He said discussions also centered on how to redirect foreign exchange to the real sector, particularly industries that utilise raw materials.
Wigwe added that discussions focused on cutting back forex for the payment of school fees and re-channeling same to the real sector.
He said: “We find different pressure on different banks in terms of demand, but generally never below 15 per cent of the demand of the current foreign exchange that is being given to the banks is for school fees, and that by any stretch of imagination is significant.
“Now the deliberations we had today did not agree on any final position but one thing was clear, which was the fact that we should not allow this demand to crowd out real sector investments, because the money you get to pay these school fees is from industry that is working locally.”
However, we did not reach any formal conclusion but it is part of the general direction in which we are headed,” he said.
But some commentators viewed the deliberation by the committee as a signal that the CBN may soon be allocating forex to payment of school fees abroad.
While the naira has been held firmly at N197 to a dollar by the CBN, it has continued to depreciate steadily on the parallel market. This, has heightened calls for the apex bank to further devalue the currency, a move some have argued would help bridge the gap between both forex markets.
The CBN of dollars to Bureau De Change (BDC) operators in its bid to preserve the country’s decreasing external reserves.
“In my own view, the central bank should address the supply side of the market by allowing oil companies and banks to sell dollar to bureau de change operators as an immediate measure to reduce pressure on the naira,” the President, Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadabe said.
Meanwhile, crude oil prices continued to march higher in choppy trade on yesterday, gaining on hopes of production cuts to help rebalance an oversupplied market. On the New York Mercantile Exchange, light, sweet crude futures for delivery in March rose 39 cents, or 1.4 per cent, to $29.83 a barrel, while April Brent crude gained 31 cents to $33.67 a barrel.
The gains came amid continued talk of a potential meeting between members of the Organisation of the Petroleum Exporting Countries. Such talk periodically buoys the market amid hope that OPEC will agree to cuts in supply.
Oversupply had been the biggest culprit in keeping oil prices in the doldrums for the past two years. However, prominent suppliers such as Saudi Arabia, Iran, and Russia, have been reluctant to scale back production, fearing the United States shale producers would swoop in and expand their market share. To prevent that, OPEC had kept production high, with the aim that the persistently low prices will eventually drive away competitors, according to marketwatch.com.