The naira plunged to 400 against the dollar at the parallel market on Thursday as shortage of foreign exchange continued to have negative effects on economic activities in the country.
The local currency had closed at 390 against the greenback on Wednesday. After closing at around 378 against the dollar for most part of last week, the naira dropped to 380 on Friday before falling to 382 on Monday.
The currency closed at 315.06 to the United States dollar at the interbank market on Thursday.
Economic and financial analysts have linked the wide depreciation in the value of the naira against the dollar at the parallel market to huge demand for forex by holidaymakers seeking to travel abroad.
However, According to Punchng some experts said the huge demand for forex at the parallel market was beyond the normal summer rush.
They linked the development to the activities of speculators and significant demand by manufacturers and importers whose demand was not being met at the interbank market.
Currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said, “The issue still has to do with inadequate forex supply. As far as you continue to have some 41 items banned from the interbank market, importers and manufacturers of those items will continue to seek for forex at the parallel market.
“This is part of the reason you are having pressure at the parallel market.”
According to Ezun, the global plunge in oil prices has affected the capacity of the Central Bank of Nigeria to defend the naira.
“If the price of oil should go up, more forex will come in and you will see that things will change,” he added.
A Professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, Sherrifdeen Tella, said the huge demand for dollars could be due to the activities of genuine manufacturers and importers seeking forex for production and business purposes, or corrupt people who had stolen state funds.
Tella said, “The naira is falling at the parallel market because there is scarcity at the interbank market. This fall could be due to the activities of genuine manufacturers or some people you cannot identify. These are people who have stored naira somewhere and are seeking to convert them to dollars. They use every chance they have to buy dollars. What the CBN may need to do is to neutralise that money by changing the colour of the N500 and N1,000 notes.
“If the naira keeps falling at the parallel market, then we should prepare for further increase in the prices of goods and services. And this will continue to give us more trouble as a nation.’
The National President, Association of Bureau De Change Operators, Alhaji Aminu Gwadabe, said the fall in the naira value could be linked to the activities of speculators.
He said the demand was spurious, saying it was not coming from genuine sources.
“The demand is spurious; the challenge is that there is no liquidity in the market. If you ask any of the parallel market operators calling N400 per dollar to bring the dollar that you want to buy it, they don’t have,” Ezun said.
The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said that if the naira continued to fall at the parallel market, the country would need to brace for higher rate of inflation and further contraction in economic growth.
It was learnt on Thursday that the Deposit Money Banks had started selling forex to the Bureau De Change operators in line with the CBN directive.
Banking sources confirmed that the sale begun on Thursday.
The ABCON president, Gwadabe, also confirmed the development.
“The banks started selling to us today, we will be debited tomorrow and then receive the forex. We thank the CBN and the banks. This move will help to close the gap between the exchange rates at the parallel market and interbank market,” he stated.