Economy

Again, Naira Strengthens To N420/US$ On CBN FX Sales

The Nigeria Naira, again strengthened, exchanging N420 to the US$ in the BDC segment on Wednesday, September 2, 2020, on the back of the Central Bank of Nigeria (CBN) resumed intervention in the Investors and Exporters (I&E) window.

Prior to CBN’s renewed intervention in the I&E window on Monday, August 31, 2020, the Naira had exchanged for as high as N480 to the US$, prompting fears that the Naira was in a free fall.

A statement by the apex bank said speculators are in for bigger losses, following their failure to heed previous warning signs.

The Naira, the statement hinted, started to rebound against the US$ following an announcement by the CBN that it would also resume the sale of foreign exchange to operators of Bureau de Change (BDCs) from Monday, September 7, 2020.

Commenting on the issue, Director, Corporate Communications Department at the CBN, Isaac Okorafor reiterated that the bank had concluded plans to inject liquidity into the foreign exchange market by selling forex to licensed BDC operators.

According to him, the sale to BDCs would be gradual and done twice weekly – Mondays and Wednesdays, following which operators in the segment had been directed to ensure that their accounts with their banks are adequately funded to ensure seamless transactions.

While warning speculators to desist from what he termed unpatriotic tendencies, Okorafor urged registered BDCs to comply with the CBN guidelines as the bank would not hesitate to sanction any erring dealer. He also assured that those requiring foreign exchange for purposes of travel, educational fees and other invisibles could obtain such over the counter from their respective banks.

Meanwhile, the President of the Association of Bureau de Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe has expressed support for the CBN action, noting that the anticipated intervention in the BDC sector would ensure stability in the foreign exchange market.

According to him, speculators in the forex market have been dealt a huge blow with the sharp drop in the exchange rate, which he said would continue a downward trend with the resumption of international flights in and out of the country.

Recall that the CBN, in a circular signed by its Director, Trade and Exchange Department, Dr. Ozoemena Nnaji, on Thursday, August 27, 2020, announced plans by the CBN to resume the sale of foreign exchange to BDCs as part of effort to enhance accessibility to foreign exchange.

Reacting in a note to investors in the Wednesday evening edition of Zimvest Daily Brew, analysts at Zedcres Investment Managers say they do not “see how the CBN will sustain this intervention considering the weak foreign reserves and lower oil prices,” despite the strengthening of the Naira due to improved dollar liquidity.

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