CBN Claims Responsibility For Parallel Market Crash

There are strong indications that the efforts of the Central Bank of Nigeria (CBN) to stabilise the Naira may have started yielding positive results, as the “first test-run” of the measures has hit the speculators.
Top sources at the apex bank who pleaded anonymity, yesterday, said that the deployment of a number of measures by the institution had proved that turning the tide in the forex market is not impossible, especially with the “severe punishment suffered by currency hoarders and speculators” on Wednesday.
It will be recalled that the CBN had said that speculators were behind the market burble, which made a mince-meat of the Naira, sending it crashing to an all-time low of N400 to the dollar.
A source said even though the rates at the parallel market may fall again as speculators may persist, they will only be “gambling” with what is left of Wednesday’s loss, which they will eventually lose with further “strike” from the plans.
The naira’s exchange rate to the dollar had on Wednesday assumed multiple pricing trend at various centres across the country, with the lowest price at N220 to the dollar, while the highest was N300.
“Some parallel market operators revealed that they bought from sellers at the rate of N272 and sold at N295. A good number of the sellers who had suffered huge losses confessed that they had bought at the rate of N380 hoping to sell at N400 before the sudden turn in fortunes,” one of the officials said.
But with the return of speculators to mop up “cheap” dollar at the parallel market yesterday, the exchange rate of the naira to the dollar immediately rose to N330.
The acting President of the Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadabe, said: “Hoarding and speculative activities have returned to the market almost immediately, pushing down the naira’s value again.”
Also, a currency trader said “many people have been asking to buy the dollar today (yesterday), while not many people are coming to sell to us.”
Analysts said the sudden drop was a failed expectation of devaluation, as the Federal Government and the CBN unanimously agreed to resist the pressure, mostly from foreign portfolio investors and their local counterparts.
The Executive Director, Finance, BGL Capital, Femi Ademola, said the recent appreciation may have been response to the persistent advice of the International Monetary Fund (IMF) for the country to adopt a floating exchange rate policy.
By the policy, CBN would remove the peg on the exchange rate, but intervene in the critical sectors of the economy, which would end the struggle for the foreign exchange, as banks would begin to sell at rates determined by market demand.

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