Nigeria’s currency has continued to experience free-fall against the Dollar two months after the Central Bank of Nigeria’s floating of Naira, a decision that has further worsened the woes of Africa’s largest economy.
From 14 June, when CBN liberalized the forex market, till date, the country’s currency has continued to slump against the Dollar from N750/$1 at the parallel market known as a black market to N950/$1 on Monday, August 14, 2023.
The situation became more worrisome as the gap between the official window and the parallel market widened with a differential of N181, defeating the essence of CBN’s floating of the Naira.
The ongoing probe of the apex bank by a special investigator, Jim Obazee, appointed by President Bola Ahmed, may have worsened the depreciation of the Naira, according to experts familiar with the sector.
Details from the CBN’s seven years consolidated financial statements released last week showed a combined indebtedness of $7.5 billion to JP Morgan and Goldman Sachs, with a foreign reserve of $33.88 billion. This is part of the reasons the forex crisis has lingered, Prof Uche Uwaleke, an economist stated.
But the Acting CBN governor, Folashodun Shonubi, blamed undocumented forex remittance and the unregulated parallel market for the woes in the sector.
Consequently, the country’s economy, which heavily depends on fuel, continues to bleed from the forex crisis.
For instance, the oil marketers have dropped a hint of a further hike in petrol pump prices as a reflection of the soaring price of the Dollar.
That would affect the masses still struggling to cope with July’s fuel increment occasioned by petrol subsidy removal since June.
Speaking with CEOAFRICA source on Monday, the president of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadabe said its members cannot be blamed for the ongoing crisis in the forex market.
He blamed the prevalence of unlicensed online platforms operating in different jurisdictions without standardized regulations capturing diaspora remittances and denying the official market.
According to him, the recent happenings in the sector had further brought the need for CBN to have its members pick up agents of diaspora remittances to block loopholes and stymie the forex crisis.
“The revelation of the apex bank on diversion of diaspora remittance has vindicated our long-time advocacy to make BDCs pick up agents of diaspora remittances to block the loopholes that the CBN is bringing to the forefront.
“To make diaspora remittance inflows into the official market, the BDCs should be made the sole agents of diaspora remittances and break the monopoly of the agency of the international money transfer operators.
“What we have now is the prevalence of unlicensed online application platforms and fintech that operate in different jurisdictions without standardized regulation capturing diaspora remittances and denying the official market”, he stated.
Also, Idakolo Gbolade, Chief Executive Officer of SD & D Capital Management, said the continued Naira decline could be attributed to the reduction in forex inflows into the economy, resulting in foreign currency scarcity.
He stated that major oil companies, establishments and commercial banks contributed significantly to the forex crisis by encouraging increased scarcity for their benefits and profitability.
Gbolade urged that the government must urgently pursue policies that halt further deterioration in the sector.
“The Naira’s continuous decline can be mainly attributed to reduced forex inflows into the economy, which has led to the scarcity of foreign currencies and has put pressure on existing reserves. These pressures, combined with our debt obligations, have led to reduced foreign reserves.
“The cooperation of major forex revenue contributors like the oil majors and commercial banks are also suspect because they have encouraged increased arbitrage in the foreign exchange for their benefit and profitability.
“The federal government needs to critically examine the policy and ensure that the CBN monitors the implementation of the policy.
“This uncertainty in this sector has contributed to rising inflation and rising high cost of living,” he stated.