Currency dealers expressed concerns over increasing financial losses and diminishing demand for the dollar as the naira continued to strengthen in both the official and parallel markets. This trend followed a significant 12% reduction in the exchange rate for bureaux de change (BDC) to N1,117.5 per dollar by the Central Bank of Nigeria (CBN).
In a recent circular titled “The Use of Foreign-Currency Denominated Collaterals for Naira Loans,” the CBN announced a ban on the utilization of foreign-denominated collaterals for naira-based loans, with exceptions for specific instruments like Eurobonds issued by the Federal Government of Nigeria or guarantees from foreign banks.
The naira’s appreciation was evident in official market data from FMDQ, showing an increase of N20.44 to N1,230.61 per dollar, while the parallel market also experienced a rise to N1,200 per dollar. This came after the CBN’s announcement of selling $10,000 to 1,588 BDCs at N1,101 per dollar for eligible invisible transactions, with a directive for a maximum spread of 1.5% for end-users.
Currency dealers, speaking to Vanguard, highlighted their challenges with the naira’s consistent appreciation, leading to financial setbacks. They cited instances where the exchange rate fluctuations resulted in losses for BDCs and impacted customer decisions to engage in transactions.
Experts analyzing the naira’s appreciation attributed it to various CBN policies that instilled market confidence, cleared forex backlogs, and attracted foreign portfolio investments. They emphasized the importance of sustained stability through continued supply, government interventions, economic fundamentals, and global factors.
The Association of Bureaux De Change Operators (ABCON) President, Aminu Gwadabe, expressed optimism about the naira’s sustained appreciation, attributing it to collaborative efforts and policy measures that deter illegal practices in the market. He highlighted the positive outcomes of these initiatives in enhancing market efficiency and reducing incentives for illicit economic behaviors.
