The value of the naira had within two months, depreciated by 16.1 per cent or N80 from N495 at which it was being sold in July, to N575 as at Monday morning. The depreciation of the value of the local currency had begun just after the CBN announced that it will no longer be selling foreign exchange to bureau de change operators.
The CBN referred individuals seeking foreign exchange for personal and business travel allowances, school and medical bills and other legitimate dollar requests to commercial banks.
Despite several assurances by the CBN as well as commercial banks that there is enough foreign exchange to meet legitimate demand, the value of the naira kept depreciating. This, according to analysts was spurred by speculators who were expecting the value of the currency to fall as low as N600 or N700 to a dollar.
According to Head, Retail Investment, Investment Management Group at Chapel Hill Denham, Ayodeji Ebo, the depreciation of the naira at the parallel market is due to demand forex by some manufacturers as well as individuals.
“There are a lot of items that are not on the CBN list that still requires funding, even investment. The banks will not sell dollars for you to buy Eurobond,” he explained, adding that individuals seeking to invest now prefer dollar-based investment, further increasing demand.
Head of Financial Institutions at Agusto & Co, Ayokunle Olubunmi, noted that a bulk of demand for forex is mainly from individuals buying it as a store of value and those seeking to buy Eurobonds.
Meanwhile, some Nigerians buying dollars who spoke with me noted that with the present rate of inflation in the country, it is not wise to keep funds in the local currency.
Meanwhile, the CBN has said it does not recognise any other rate asides from the official rate at the Investors’ and Exporters’ window where the naira is selling for N413 to the dollar. Rising from the September 2021 Monetary Policy Committee meeting in Abuja, the CBN governor, Godwin Emefiele, had accused websites such as Abokifx.com of manipulating the parallel forex market.
An analyst who craved anonymity on professional grounds noted that the crash of the value of the naira is a self-fulfilling prophecy of which many Nigerians are to be blamed. “The legitimate demand for dollar presently will not cause the spike that we are seeing in the market now.
“The bulk of the problem is speculation by ordinary Nigerians who are buying, with the hope that the value of the naira will fall and the dollar rises. What many do not know is that once they buy with such intent, it further pushes the naira down causing artificial scarcity.
“This is happening because we are having a case of the dollarisation of the economy and people believe more in the dollar than they believe in the naira,” he said.