The value of the naira continued to sink at the parallel market yesterday selling at N245 to the dollar and N366 to the British pound even as the external reserves and inflation figures of the country maintained a steady rise.
The demand for foreign currency at the parallel market which is constituted by the bureaux de change and black market operators had soared after the Central Bank of Nigeria (CBN) decided to exclude 41 items from assessing foreign exchange at the official end of the market.
It had taken this decision as the external reserves of the country declined to $29 billion and have since been on the uptick, rising by 3.3 per cent within 13 days.
According to figures made available on the website of the CBN, reserves which stood at $29 billion as at June 30 had risen by almost $1billion to $29.955 billion as at July 13, 2015. Foreign exchange demand for the 41 items had subsequently moved to the parallel market, increasing the pressure in the market.
According to a currency analyst at Ecobank, Olakunle Ezun, the value of the naira will continue to decline until the supply issue of the market is addressed.
“The problem is that of demand and supply and until that is resolved the naira will continue to go further down. Unfortunately the CBN has said that that market is out of its control,” Ezun said.
The widening gap between the exchange rate at the parallel market and official interbank market, according to analysts, increases the temptation of financial institutions to involve in round tripping.
As at yesterday, the dollar sold for N198.04 at the interbank and N196.95 at the CBN. A trader explained that the CBN sanctions on round tripping had made it unattractive for banks “because the risks are just too high. If anyone gets caught, apart from the trader getting punished, the bank also stands to lose its foreign exchange licence, and that is too high a risk to take. But that does not mean that a couple of people would not still do it.
”Inflation had continued to rise as the effect of the devalued naira dawns on the import-dependent economy. Steadily rising since January, inflation had risen to 9 per cent in May and had further increased by 0.2 percentage points to 9.2 per cent in June, according to latest figures issued by the National Bureau of Statistics.
