Naira Crashes to N525/$ in the parallel market: may worsen

The Nigerian Naira has further crashed in the parallel market selling at N525/$ this morning. The current Naira malady followed the decision by the Central Bank of Nigeria (CBN) to discontinue dollar sales to the Bureau De Change operators in the country. With the latest rate, Naira…

However, Obadiah Mailafia, a former deputy governor of the Central Bank of Nigeria (CBN), says the decision of the Central Bank may worsen naira value achieving the exact opposite of the intended consequences. According to him “If we are not careful, that decision will actually worsen the naira value because the BDCs, you could walk into any of them anywhere and within five minutes, they will attend to you but the banks, you have to drive to your nearest bank, you have to queue most of the time,”

According to Mailafia, who aired his views during an interview with Punch, commercial banks in Nigeria cannot be trusted with the sales of forex.

“Bankers were the biggest experts in round-tripping. Old habits, I don’t think they change. Leopards are very unlikely to change their spots. So, we may end up in a scenario where there is scarcity and the simple economics of demand and supply tells you that where there is increase scarcity, price is likely to shoot up. If bank bureaucracy makes it difficult for people to access dollar, what it means is that the bureaucracies, obstacles and bottlenecks are likely to put pressure on supply and pressure on supply may mean an increase in demand for the dollar and greater fall of the naira, if we don’t play the cards well.” He added

 Recall that the CBN on Tuesday banned the sale of forex to BDCs on the ground that the BDCs have become conduit for illegal forex flows and graft.

The ban does not stop the operations of the BDCs. It only means that the operators will have to source forex from other suppliers, not the central bank. The CBN will be selling directly henceforth to commercial banks, from where customers who have legitimate and applicable transactions will be able to buy.

Sourcing dollars and other forex from a third sources such as buying from Nigerians who receive foreign currencies means that the BDCs may likely be selling at higher rates.

=The coming days and weeks will reveal how effective this measure will be on the economy and on the value of the Naira.