By John Ikani
The Nigerian naira has hit a new low against the US dollar, trading at N803.9 to a dollar in the official forex market and N822/$ in the parallel market.
The depreciation of the naira comes as the Central Bank of Nigeria (CBN) has been unable to attract increased forex supply to the market.
This is despite the CBN’s recent reforms, which eliminated multiple exchange rates and reintroduced the “willing buyer willing seller” market model in the I&E window.
Dealers in the forex market say that the expected increase in forex supply has yet to materialize, and that this, coupled with rising demand, is driving the renewed depreciation of the naira.
“People are demanding for the dollar,” said Ahmed Danjuma, a parallel market operator in Lagos Island.
“It is not easy to get dollars from the bank because it is very scarce. When you have access to dollars the way buyers demand for the currency is like when you take food to the prison. The supply is very low. Even Bureau De Changes have little access to the foreign currency.”
The CBN has said that it is working to attract increased forex supply to the market, but so far, these efforts have not been successful.
Analysts say that the CBN needs to take further steps, such as removing forex restrictions on 43 items and incorporating BDCs into the I&E window, in order to reverse the trend.
“The trend will continue except if there is a turnaround, and there are changes in the I&E to bring in more players like BDCs to enhance competition,” said Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria.
“Once you have competition there will be stability, there will be availability.”
Analysis
The depreciation of the naira is a major problem for the Nigerian economy. It makes it more expensive to import goods and services, which can lead to higher inflation.
The naira’s depreciation also makes it more difficult for Nigerians to travel abroad.
Although the apex bank’s reforms have been a step in the right direction, but they have not been enough to attract increased forex supply to the market.
The CBN needs to do more to encourage foreign investors to bring their money into Nigeria.
Also important is the need fot the CBN to address the issue of hoarding as there are reports that some people are hoarding dollars in order to profit from the depreciation of the naira.
The CBN needs to crack down on this practice in order to increase the supply of dollars in the market.
Overall, the depreciation of the naira is a serious problem, but it is not insurmountable.
If the CBN takes the right steps, it can stabilize the naira and protect the Nigerian economy.
