Naira has weakened by 34 per cent in 10 months, closing at N710 to a dollar on Wednesday in the parallel market, with a margin of N280 from the official rate.
This is a pounding headache for manufacturers who are no longer able to get dollars from the official market to import their raw and packaging materials.
At the Investor & Exporter forex window, the naira hit a high of N444 before closing to the dollar at N430. The I&E market recorded a total turnover of $126.69m on Wednesday.
The President, Association of Bureaux de Change Operators of Nigeria, Alhaji Aminu Gwadabe, told The Punch on Wednesday evening that, “the rate closed at N710/$.”
Some Bureau de Change operators who spoke to one of our correspondents from Ikeja, Lagos, said a dollar was bought and sold for N700 and N710 respectively.
At Zone 4 in the Federal Capital Territory, Abuja, a dollar hovered between N705 and N710 between 11am and 4pm yesterday.
“Dollar is really very scarce today. You cannot find it anywhere,” said Abu Sani, one of the BDCs operating at the Abuja International Airport.
According to the head of BDCs, Gwadabe, the situation resulted from a drop in dollar supply and an unmet dollar demand, saying these had created a huge backlog, making it easier for unlicensed forex dealers to engage in speculative activities.
Gwadabe said over $20bn dollars was expected to come into the economy from the diaspora this year, with a large part of such funds coming in through unofficial channels because of the control by International Money Transfer Operators and other favored operators.
He noted that the BDC operators had established channels and should be allowed to access funds from the diaspora to add to Nigeria’s dollar liquidity and strengthen the local currency.
Nigeria has failed to leverage oil windfall to drive huge dollar inflows into the economy due to an opaque petrol subsidy regime, oil theft and lack of gas infrastructure. Its non-oil exports last year was merely $10bn, four times less than Vietnam’s $38bn earnings from garments in 2021 and nearly five times less than what the country received for exporting phones ($57.54 bn).
According to Professor of Economics at Nnamdi Azikiwe University, Awka, Anambra State, the situation was created by a demand pressure and politics, stressing that it could also have been fuelled by the rising insecurity.
“Nigeria is not producing anything. Infrastructure for production is not there. Lives are being lost and Nigerians are losing confidence in government. Under the situation, it is possible that people are looking for dollars to move abroad and escape the situation in Nigeria,” he said.
According to those who have sought travel allowances from deposit money banks, it takes months to get as little as $500 from banks. The situation has pushed many of them to the parallel market.
According to Nwogwugwu, Nigeria must now begin to get it right and revitalise the manufacturing sector to produce and earn dollars.
On his part, Gwadabe said apart from remittances, Nigeria needed to build an economy that was a net exporter of valuable goods and services to earn more dollars.
He said, “Now is the time for Nigeria to deepen its manufacturing base with products that will earn forex for the country. Nigeria needs to become a manufacturing hub and export more than it imports. That way, the naira will regain its voice and appreciate against the dollar and other global currencies.”
Gwadabe noted that though the naira was quoted at N710 to dollar at the parallel market, giving more roles to over 5,500 BDC operators would help to reduce pressure in the forex.
Meanwhile the Senate, on Wednesday, resolved to summon the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, to educate and inform senators in a closed session 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 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 orders 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, had 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 BDC operators and importers over allegations of abuse and mismanagement.
He observed that the halt by the CBN had 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.”
He expressed worry that the import and export window meant to serve the forex needs of business giants, “has become a rare opportunity that only a privileged few can access.”
“These and a number of others have contributed to the excessive scarcity of forex in Nigeria today,” he added.
In his contribution, Senator Sani Musa (APC – Niger East), faulted the Central Bank’s decision to halt foreign exchange biddings, thereby cutting off the parallel market – Bureau de change operators.
According to him, the attempt by the CBN to control the value of the naira with the continuous exclusion of BDCs would only lead to its further depreciation.
He, therefore, advised the apex bank to rather ensure the regulation and monitoring of the parallel market.
“What CBN used to do was to give out $10,000 (USD) to each of these BDCs with a clear directive for it not to be sold above N470 as against the $419 exchange rate. It worked.
“But today, nobody is determining where the rate is going and I can assure you we can’t have that solution because we are only importing,” he said.
On his part, Senator representing Katsina North District, Senator Ahmad Babba-Kaita, said one way to improve the value of the naira was to encourage foreign investments to attract inflow of other currencies into Nigeria.
“The only way we can access the dollar will be determined by other economies and not ours,” he noted.
He, however, attributed the lack of foreign investments into Nigeria to the poor security situation caused by banditry, terrorism, and other criminal activities.
The Senate, in its resolutions, called on the CBN to urgently intervene to stop the rapid decline in the value of the naira vis-à-vis the dollar and other international currencies.
It also mandated the Senate Committee on Banking, Insurance, and Other Financial Institutions to conduct an assessment of CBN intervention funds and the declining value of naira to come up with sustainable solutions.