The value of the naira reached an all time low as activity of speculator and scarcity of the dollar drove the value down to between N690 and N700 to the dollar at the parallel market depending on the area of the country.
This as the Senate has summoned the governor of the Central Bank of Nigeria, Godwin Emefiele, over the free fall of Nigeria’s currency, Naira.
Findings revealed that while the naira sold at N690 in Ikeja area of Lagos, it sold at N700 in Lagos Island and N710 in Abuja. Currency traders attributed the declining value of the naira to scarcity of the dollar and increased demand by customers.
A currency trader in Alade area of Lagos said that the downturn of the economy is being reflected in the foreign exchange market as there was no dollar to sell. “Dollar is very scarce right now and we do not even have any to sell. Even though it is selling at N690 this evening, (Wednesday July 27, 2022), it will surely go above N700 before the end of this week at this rate of scarcity.” He said.
Professor of Capital Market at the Nasarawa State University Keffi, Uche Uwaleke had noted that the second half of the year will be rife with volatility in the forex market with the naira losing value due in part to exit of foreign investors as well as increased demand for forex by Politicians and also rising yields in the fixed income market.
On his part, Head of Consulting at Agusto Consulting, Jimi Ogbobine said “the recent jump we are seeing is basically a result of a supply crisis in the forex market. So the foundation of all of these is demand versus supply and when demand outweighs supply you will see this kind of currency depreciation.
“If the central bank was able to meet forex demand, then we will not see this kind of price distortion.”
ria is not able to meet forex supply and on the other end we are trying to restrict and constrict demand which means that quite a number of legitimate requests for forex are now being diverted to the parallel market.
Meanwhile, the Senate wants the CBN governor to educate and inform the senators on the reasons for the rapid depreciation of the value of the naira.
It also mandated the Senate Committee on Banking, Insurance and Other Financial Institutions headed by Uba Sani to assess the impact of CBN intervention funds meant to support critical sectors of the economy.
The resolutions were reached by lawmakers after the upper chamber considered a motion sponsored by Senator Olubunmi Adetunmbi (APC – Ekiti North).
The motion was entitled, “State of CBN Intervention Funds and Free Fall Of Naira.”
Coming under Order 41 and 51 of the Senate Standing Order, as amended, Adetunmbi bemoaned Nigeria’s economic reality amid an urgent call for “extraordinary measures”.
He noted that the CBN through its numerous multi-sectoral intervention funds, provided special funds to support critical sectors of the economy.
He explained that in view of such interventions, it had become necessary to assess the state of implementation and effectiveness of the funds deployed for the purpose.
The lawmaker, recalled that the CBN in 2021, placed an indefinite halt on forex bidding by Bureau de Change operators (BDCS) and importers over allegations of abuse and mismanagement.
He observed that the halt by the CBN resulted in a spike of the exchange rate.
According to Adetunmbi, “the two instruments of Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) could only serve less than 20 per cent of the total forex demand by travelers and businesses.”