Naira responses to CBN’s forex policy, loses N2.60 against dollar

BY FELIX OLOYEDE
Following the Central Bank of Nigeria’s (CBN) barring of  importers of
38 items, including those who want to purchase Eurobonds, foreign
currency bonds and shares from participating in the interbank forex
market last week, the naira yesterday lost N2.60, trading N226 against
the dollar at the parallel market.
Before the latest policy from the CBN, the country’s currency was
N220/$1 and banks have been struggling to demand the forex demand of
their customers due to the acute scarcity of dollar.
The naira exchanged N198.90/$1 at the interbank market, despite the
apex bank pegging exchange rate at N196.90/$1.
The President, Association of Bureau de Change Operators of Nigeria
(ABCON), Alhaji Aminu Gwadabe, told Hallmark that the loss N2.60
suffered by the naira is in response to the latest CBN policy on
forex, which has put a lot of pressure on the street market, which is
meant to fill the vacuum created by barring of the importers from
exploring the official market.
“Those banned from participating in the official market is a very big
forex market. They need to find a way of meeting their forex needs.
This is what is pushing price up,” he opined.
Gwadabe added that the CBN had threatened to revoke the license of any
registered forex dealer that sells forex to importers of the listed
items.
It would be recalled that the apex bank last Wednesday in a circular
excluded importers of 41 items from participating in the country’s
interbank currency market.
In the circular signed by its Director, Trade and Exchange, Olakanmi
Gbadamosi, the CBN listed 40 items that are not valid for forex in the
interbank market, they include: rice, cement, private jets, a wide
range of other construction materials, plastic and rubber products,
cosmetics etc.
The CBN has taken different measures aimed at strengthening the
country’s currency that has shed over 8 per cent of its value this
year alone.
The regulator had earlier this week met with banks chiefs to fashion
out ways of further strengthening the forex market, although the out
of the meeting was not made public.
It would be recalled that the apex had in February closed the Retail
Dutch Auction System (rDAS) and Wholesale Dutch Auction System (wDAS)
and directed all that are need of forex route their demands through
the interbank market.

Meanwhile, the country’s sovereign bond yields yesterday rose more
than 10 basis point along the curve.
Investors expressed worries about the impact of a weaker currency on
inflation and a possible rise in government borrowing.
The most liquid 5-year bond yield climbed 12 basis points to 14.71
percent on Monday, while the 10-year benchmark yield climbed 10 basis
points.