By Milcah Tanimu
Currency dealers are facing mounting losses and declining demand for the dollar as the naira continues to appreciate in both the official and parallel markets. This follows a significant reduction in the exchange rate for bureaux de change (BDC) by the Central Bank of Nigeria (CBN), which now stands at N1,117.5 per dollar.
*Ban on Foreign Denominated Collaterals*
The CBN has also announced a ban on the use of foreign currency-denominated collaterals for naira loans, except for specific exemptions such as Eurobonds issued by the Federal Government of Nigeria or guarantees from foreign banks.
*Naira Appreciation*
Data from FMDQ indicates that the naira appreciated to N1,230.61 per dollar in the official market and N1,200 per dollar in the parallel market. The CBN has also announced plans to sell $10,000 to 1,588 BDCs at a rate of N1,101 per dollar, with a directive for BDCs to sell to end-users at a spread of not more than 1.5 percent above the purchase price.
*Lamentations of Currency Dealers*
Currency dealers have expressed concern over the steady appreciation of the naira, citing significant losses incurred due to the reduction in the exchange rate. Many BDCs bought dollars at a higher rate before the CBN announced the slash in the rate, leading to customer hesitation in transactions.
*Factors Driving Naira Appreciation*
Analysts attribute the naira’s appreciation to various CBN policies that have restored confidence in the market, cleared forex backlogs, and attracted foreign portfolio investments. High-interest rates have also made it challenging to source naira for dollar purchases.
*Optimism Amidst Challenges*
Despite the challenges faced by currency dealers, there is optimism that the naira’s appreciation will be sustained. The reduction in incentives for sharp practices and the implementation of stringent policies by the CBN have contributed to market efficiency and discouraged illegal economic behaviors.
In conclusion, while the naira’s appreciation is a positive development, sustained stability will depend on continued supply, government policies, economic fundamentals, and global factors.