The naira sustained its decline on the
parallel market as it slipped to N445 to the dollar yesterday, lower
than the N440 to the dollar it closed on Friday as pressure and
activities of speculators continued to hurt the nation’s currency.
But on the interbank FX market, the spot
rate of the naira depreciated marginally to N308 to the dollar, as
against the N307.79 to the dollar it closed last Friday.
The President, Association of Bureau De
Change Operators of Nigeria (ABCON), Mr. Aminu Gwadabe, argued that the
current rate of the naira on the parallel market was not a true
reflection of the value of the currency. He also attributed the
development to the activities of speculators.
According to him, the situation in the parallel market was being driven by speculators taking advantage of the poor implementation of the Central Bank of Nigeria (CBN) policy requiring banks to sell dollars to bureau de change (BDC) operators.
According to him, the situation in the parallel market was being driven by speculators taking advantage of the poor implementation of the Central Bank of Nigeria (CBN) policy requiring banks to sell dollars to bureau de change (BDC) operators.
Some currency traders also said the
demand from parents buying dollars to pay school fees abroad was
exerting pressure on the FX market.
To analysts at CSL Stockbrokers Limited,
the effects of low oil prices and production disruptions are having
significant impact on dollar receipts by the country.
“Looking more closely at how the two are
working in tandem will provide greater insight into dollar inflows into
the country on a daily basis and what this means for dollar liquidity
in the market. By multiplying daily production data by average crude oil
prices, we derive a basic idea on the amount of hard currency flowing
into the economy on a daily basis from the oil sector.
“For example, in August, OPEC reports
that average daily production was 1.4 million barrels while the Brent
crude prices averaged $47/bbl during the month. We can therefore roughly
calculate that the value of Nigerian production was $67.7m per day in
August on average.
“It would be too simplistic to use this
as the amount of oil dollars flowing into the economy (because actual
prices are based on pre-agreed contracts rather than spot prices and not
all revenues will flow back into Nigeria) but we can get an idea of the
trajectory of oil dollar flows and their levels relative to history.
“Many observers are questioning why
foreign investors have not returned to the market in droves. One likely
explanation is that the low value of oil production means that liquidity
on the interbank market remains low and foreign investors remain
fearful that liquidity will not be available when they decide to exit
the market,” Lagos-based CSL Stockbrokers Limited added in a note.
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