NgeneUkwenu:
LAGOS—The fortunes of the national currency, the Naira took a sharp turn downwards yesterday as it fell by 270 kobo, with the parallel market exchange rate rising to N180 per dollar from N177.3 on Monday.
Since the beginning of the month, the Naira has fallen against the US dollar by N7.9 at the interbank market, and N10 at the parallel market.
Interbank and parallel market operators attributed this sharp depreciation to restrictions introduced by the CBN to curb foreign exchange demand at the official market. Falling crude oil prices, coupled with depleting Excess Crude Account has triggered palpable anxiety about the value of the Naira. Stocks have also been hit as a result.

Emefiele
On October 28, in addition to a 10-kobo margin limit imposed on intervention dollars, the CBN banned banks from selling dollars to Bureaux de Change (BDCs). Furthermore, on November 6th, the CBN excluded importation of six items from official foreign exchange, saying it would no longer sell official forex for their importation. The items included electronics, finished products, information technology, generators, telecommunication equipment and invisible transactions. According to the apex bank, the items would henceforth be funded from the interbank foreign exchange market only.
Thus, the apex bank unwittingly shifted forex demand for importation of the six items from the official market to the interbank market.
The two restrictions combined triggered sharp increase in demand for forex in the interbank market, and scarcity of dollars in the parallel market. Though the CBN was selling intervention dollars to banks, banks could trade with the dollars because of the 10 kobo limit. This, according to a foreign exchange dealer created a scarcity situation in interbank and the subsequent steady depreciation of the naira.
Why CBN imposed restrictions
The restrictions were imposed to stem the persistent decline in the nation’s external reserves following continued decline in price of crude oil. Within three months, the price of crude oil fell from $100 per barrel to $78 per barrel.
The sharp decline in crude oil prices occasioned apprehension among foreign investors, who believe that with decline in revenue from crude oil, and the CBN using the reserves to defend the Naira, it would not be long before the Naira suffered sharp depreciation. Hence they moved their money out of the country by divesting from the nation’s stock market and FGN bonds.
Scarcity of dollars behind Naira’s fall
Acting President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe in a conversation with Vanguard said the depreciation was due to scarcity of dollars in the market. He said most of the banks are not selling dollars to BDCs, thus worsening scarcity in the market.
This was corroborated by Managing Director/Chief Executive, HJ Trust BDC, Mr. Harrison Owoh. He said that parallel market rate rose from N177.3 to N180 per dollar because there is no dollar in the market. He said the banks are not selling to BDCs, and the two banks that sold, sold at N179 per dollar and N178.4 per dollar respectively. He added that depreciation of the Naira is not limited to the dollar, adding that it has been depreciating against the Euro and Pound Sterling in recent times too. He said the exchange rate of the Euro has risen to N220 from N117 last week. Owoh said that the market is overwhelmed with uncertainty about the exchange rate.
“In fact, we don’t know what the rate of the dollar is now”, he said.
Hoarding
However, Vanguard investigations reveal that increasing scarcity in the market has prompted operators to resort to hoarding whatever foreign currency in their possession. It was gathered that BDCs that bought dollars from the CBN at N157 per dollar last week hoarded them, only to sell this week at N179/N180 per dollar.
CBN bows to banks
The Central Bank of Nigeria (CBN) yesterday bowed to banks’ demand for the removal of the 10 kobo margin limit imposed on intervention dollars.
Meanwhile, the Naira depreciated to N180 to the dollar at the parallel market in response to scarcity of dollars in the market.
Intervention dollars
Further probes by Vanguard reveal that at a meeting between the CBN and chief executives of banks yesterday, the CBN agreed to remove the 10 kobo margin limit imposed three weeks ago on intervention dollars.
Intervention dollars are dollars sold directly to banks by the CBN to stabilise the exchange rate of the Naira in the interbank market.
“Funds purchased through the CBN interventions should be utilised within two working days of delivery at a rate not more than 10 kobo above purchase rate. Consequently, intervention funds not utilised within two working days of delivery should be returned to CBN at the original purchase rate”, the CBN said in a circular signed by Mr. I.O Gbadamosi, Director, Trade and Exchange Department.
The limit however made the intervention dollars unattractive to banks and as a result they stopped purchasing the dollars from the CBN.
Investigation further revealed that the banks deliberately shunned CBN’s request for the foreign exchange quotes or offer to sell intervention dollars.
This however frustrated efforts of the apex bank to curtail depreciation of the Naira in the interbank foreign exchange market, leading to N7.45 depreciation of the national currency last week.
To arrest this development, the apex bank called a meeting of chief executives of banks yesterday to discuss recent developments in the foreign exchange market and its effort to stabilise the exchange rate.
Vanguard reliably gathered that the bank CEOs made it clear to the apex bank the 10 kobo margin limit has to go for banks to purchase the intervention dollars.
While the meeting was in progress, the Naira continued to fall at the interbank market, with the interbank exchange rate rising to N177.3 per dollar by mid-day. It was gathered that this development and fears that the interbank exchange rate could hit N180 per dollar before the close of business yesterday prompted the CBN to accede to the request of the banks for the removal of the 10 kobo limit.
A senior foreign exchange dealer, who confirmed this development to Vanguard, said the decision to remove the limit was communicated to banks via the Reuters trading platform. In addition, the CBN and the bank captains agreed that the apex bank would continue to intervene in the interbank market.
Furthermore, the apex bank hurriedly sold intervention dollars to the banks, to arrest the free fall of the Naira in the interbank market. The move proved effective, as the interbank rate dropped sharply to N170 per dollar, before rising to close at N173.25.
Naira would continue free fall
According to Harrison Owoh, except the CBN increases dollar sale to BDCs, or allow banks to sell intervention dollars to them, the Naira would continue to depreciate in the parallel market.
“The $15,000 sold to each BDCs is inadequate to address the scarcity in the market. Once the CBN increases dollar supply to BDCs, the parallel market rate would fall significantly”, he said.
A senior foreign exchange dealer who spoke on anonymity however said the though the CBN would try to manage the situation, it is obvious that it would have to devalue the Naira very soon. He said there are increasing fears among foreign exchange dealers that the CBN surprise the market with a N15 depreciation of the naira at the official market. He said banks are already advising their customers who have dollar liabilities to move them into Naira to avoid the severe impact of a sharp devaluation of the naira.
But a former CBN Director who confided in Vanguard said that the CBN can avoid a sharp devaluation by adopting some measures. “To put a small halt to the sliding Naira, CBN should allow the market operate, since it operates RDAS, which is a post mortem fixing rate process. Secondly it should use moral suasion to manage supply by encouraging dollar earning parastatals to support the market.”

http://www.vanguardngr.com/2014/11/naira-free-fall-dollar/

podosci:

If this. continues,,,,,Everybody would feel it since we import virtualy everytin we use.....North or south christians or muslims,,,,we would all feel it

Governor Rauf Aregbesola of Osun State has described as unjustifiable a 40 per cent reduction in the federal allocation being received by the state since July 2013.
Aregbesola spoke in Lagos on Thursday during the launching of a book, ‘Yoruba Elites and Ethnic Politics in Nigeria: Obafemi Awolowo and Corporate Agency.’ The book was written by an associate professor at the University of California-Davies, Wale Adebanwi.
The governor said the reduction had no basis as the nation’s oil revenue did not fall.
He said, “If there is anything my state does not have now, it’s money. We are managing with 40 per cent reduction in our allocation from the Federal Government. It is not as if I even enjoy saying I depend on the federal allocation, but the truth is that there is no magic that I would have made to suddenly taken our state out of dependence on the federal allocation.
“It is important for us to know that there is no justification for that 40 per cent reduction in our allocation. The price of crude oil has remained almost the same at $108 per barrel, and the benchmark, according to them, is $75 per barrel.”
According to the governor, the state is now being forced to source for funds outside the federal allocation in order to meet its responsibilities of paying the entitlements of civil servants and retired workers.
He said, “So we are not close to the benchmark of $75 and yet since July of last year, there is a 40 per cent reduction in our allocation. What that translates to I will tell you.
“It means I have to get N5.4bn to augment salaries and pension from July to December; N5.4bn extra, outside allocation, to ensure that since civil servants who are still active and those who have retired are paid their entitlements.
“What I receive from federation account is not sufficient to pay salaries.”
The governor, who represented a former governor of Lagos State and National Leader of the APC at the event, Bola Tinubu, who was the chief presenter of the book, bought copies of the new book at N5m on behalf of the Osun State.
He bought copies of the book on behalf of himself with N500,000 and announced N2m for the launching of the book on behalf of Tinubu.

berem:
Okonjo Iweala-worst finance minister nigeria has ever had. Obasanjo did well by kicking her a$$ out but our clueless president retained her.

nwaanambra1:


most you quote the whole passage to make your point?

nwaanambra1:


@topic
some will see the depreciation as disadvantage while some will see it as advantageous!

importers knows what am talking about.

berem:
Okonjo Iweala-worst finance minister nigeria has ever had. Obasanjo did well by kicking her a$$ out but our clueless president retained her.

nwaanambra1:


most you quote the whole passage to make your point?

PriceOfGarri:
Some people will just comment for commenting sake. Smh

One "lady" above even said "Okonjo is the worst minister ever"
I can bet my day that she doesn't have any reason for saying that.

@topic
When almost 98% of the govt's expenditure depends solely on oil revenue, if the oil price crashes, why won't the currency crash?

I wish we had saved enough for the rainy days, as been shouted by mrs Iweala in the past.

GBTYO:


To these bunch of irredeemable ignoramus, only Buhari is the key to all of our Nations problem solving

NgeneUkwenu:


Stem Corruption and the naira will regain it's value!

berem:
Okonjo Iweala-worst finance minister nigeria has ever had. Obasanjo did well by kicking her a$$ out but our clueless president retained her.

google1:
Nigeria going !
going !!
gone !!!

GBTYO:


[s]Utter nonsense.

Nobody will take your Naira on the international market. They will prefer you pay for imports with forex.

If you like reduce government spendings and corruption to zero, the Naira will remain valueless if it does not have the corresponding FOREX reserves and the only signioficant forex earner (90%) for the economy is Niger Deltan Oil.


What did your Emir Banker do with our FOREX? He floated his satanic bank in Saudi with FOREX and dashed the remaining to the janjawiid party, sponsored bokos with some and went on giving grants to northern institutions. When he was asked to account for the mismanaged and misappropriated national treasure in his custody he went and pulled out fake figures of missing NNPC oil money that has long being debunked.
[/s]

NgeneUkwenu:


Thrash! The Oil belong to Nigerians! If you don't like it, mobilize your people to protest!

GBTYO:


Just as Lagos is no man's land abi?

parasite pls download this pdf file below it will be very useful come 2015


http://www.iita.org/c/document_library/get_file?p_l_id=98898&folderId=339193&name=DLFE-1654.pdf

NgeneUkwenu:


Not interested!

NgeneUkwenu:


Not interested!