Naira Slumps To N530/$ At Parallel Market As Pound Hits N720
LAGOS SEPTEMBER 3RD (NEWSRANGERS)-The naira yestaerday traded at all time low of N530 to dollar at the parallel market. The naira also dropped among other major currencies as it exchanged at N620/Euro, N720/ British Pounds Sterling.
Also, the Central Bank of Nigeria (CBN) yesterday lifted Post No Debit (PND) order it placed on 33 Bureaux De Change (BDCs) for violating regulatory guidelines on foreign exchange transactions.
The apex bank had in a letter to all banks (BSD/DIR/PUB/LAB/14/064) dated September 2, 2021 and signed for Director, Banking Supervision by Zacharia Markus, directed the banks to vacate ‘Post No Debit Order’ on the affected BDCs’ account.
The letter reads: Vacation of No Debit Order- All banks are hereby directed to vacate the Post-No-Debit order earlier placed at our instance on the under listed account”.
A Post-No-Debit (PND) is basically an instruction to banks not to allow any withdrawals or transfers from the bank account of account owners, essentially blocking the account from outflows. It is usually drastic a measure taken to allow for investigation and possible to reclaim any illegal inflow into an account.
The affected BDCs are Javic Bureau De Change, Epoch Bureau De Change, Seasons Bureau De Change, Catherine Bureau De Change, Elbanbino Flow Bureau De Change, First Currency Bureau De Change, Solutions Bureau De Change.
Others are Pamphino Bureau De Change, Xcom Etal Bureau De Change, Brookeside Bureau De Change, Freemind Bureau De Change, 3D Scanners Bureau De Change, Kenny Rich Bureau De Change, among others.
Many of the BDCs were placed on PND by the CBN on allegations of money laundering and terrorism financing, which the the affected BDCs had denied.
A financial market dealer who spoke anonymously said the CBN wants to use the lifting of the PND directive to douse tension in the market.
“The naira has continued to decline after the CBN stopped dollar sales to BDCs. The matter was worded by the CBN stopping Microfinance banks from selling dollars, which finally handed major dollar transactions to the banks. But the banks have also raised the alert that many forex users are bypassing the buying rules, presenting fake documents to purchase the greenback,” the source said.
According to the source, the move by the CBN is in line with the regulator’s new campaign of confidence building on the battered image of BDCs.
The naira current position represents N6 depreciation from N524 to dollar it closed last week. The naira is N8 weaker than N522 to dollar it exchanged on July 28, a day after the CBN stopped weekly dollar sales to BDCs.
A check on the CBN website showed that the local currency also lost two kobo at the official market where its exchanges at N410.37 to dollar as against N410.35 it exchange on Wednesday.
The CBN stoppage of dollar sales to BDCs had pushed manufacturers and foreign exchange end-users to the official market where backlog of unmet foreign exchange demand continued to soar. The BDCs are now sourcing dollars from autonomous sources, usually at higher prices.
Market dealers and analysts said the policy shift could increase hoarding of scarce dollars in the hands of very few forex dealers.
In emailed report to investors, Managing Managing, Financial Derivatives Company Limited, Bismarck Rewane, said channeling dollars solely to commercial banks will not solve the problem of market volatility.
For him, the banks also have challenges with keeping with set foreign exchange trading guidelines.
“The question that arises is what is the optimal solution? Administrative controls or market pricing? The interim solution of substituting BDCs with banks is hardly going to achieve much. You are virtually handing over the yam barns to goats to secure. In the end, there will be no yams nor goats,” he said.
According to Rewane, one of the options is to simultaneously allow banks to retail dollars as they have done in the past and make BDCs engage in retailing same but at a buy rate different from today’s subsidized rate, that is, buy dollars from the CBN at the parallel market rate less a N10 premium.
The Nation
Short URL: https://newsrangers.com/?p=76246
Posted by News Rangers
on Sep 3 2021. Filed under Business, National.
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