CBN blames forex speculators for Naira slump, threatens clampdown

Following a sharp rise in the exchange rate of the US Dollar against the Nigerian Naira, in Monday’s treading at the Investors and Exporters (I&E) window, the Central Bank of Nigeria (CBN) has blamed speculators in the foreign exchange (forex) market in the country, even as it threatened to clamp down on their activities.

This comes even as operators in the forex market have adduced the sharp drop in the value of the naira against the foreign currencies to liquidity squeeze.

Acting Governor of the CBN, Mr. Folashodun Shonubi who disclosed this Monday, during an interview with State House Correspondents, after he met for over an hour with President Bola Tinubu, blamed the speculators for the current surge in the demand for the dollar at the parallel market.

The Naira moved closer to a N1000/$1 exchange rate , Monday, after scaling a record all-time high of N900/dollar mark at the parallel market last week to reach N925/dollar in Lagos.

Also, last Friday, the local currency had hit a high of 799/$ before closing at 740.60/$ at the I&E forex window.

However, by Monday morning trading at the parallel market, the naira closed at 930/dollar in Lagos and 960/$ in Abuja at the parallel market.

This is also as reports of U.S Dollar shortages became rife, following claims of insufficient dollar banknotes resurfacing at the various commercial banks across the country. A situation which was also visible at the parallel market, as operators lamented the shortage.

However, reacting to the sharp rise in demand in the dollar and the consequent drop in the exchange rate of the Naira against the American banknote, Monday, the CBN acting Governor, Mr. Shonubi instead opted to blame forex speculators, adding, ‘when the government takes action against the speculators, they will incur losses as a result of their unpatriotic acts.’

“We do not believe that the changes going on in the parallel market are driven by pure economic demand and supply but are topped by speculative demand from people.

“Some of the plans and strategies we have, which I am not at liberty to share with you, mean sooner rather than later, the speculators should be careful because we believe the things we are doing, when they come to fruition may result in significant losses to them,” he said.

Shonubi added that President Tinubu is very concerned about the situation and what the Central Bank is doing to improve it.

“My presence here is more about the concerns the President has and his need to know that we are doing something about it; assurances of which I have given him totally,” he said, adding that the CBN ‘is looking at the situation and is already taking steps that will significantly impact the market very soon so as to impact the lives of average Nigerians.’

Meanwhile, reacting to the sharp drop in the value of the Naira against the U.S Dollar, Monday, President, Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said liquidity squeeze in the foreign exchange market has continued to subject the local currency under heavy attack from speculators.

“The dwindling supplies in the I&E window shifted the demand to the parallel market where volatility and spikes is most pervasive. The entire forex market is plagued by liquidity shortages.

“The banks, as a result of the supply shortages, are limiting their available position for the financing of visible letters of credit and abandoning the invisible request like PTA, school fees, medicals of their clients and inadvertently adding more pressure in the parallel market.

“As it is, most licensed BDCs due to their demand for KYC requirement have lost their clients to the parallel and undocumented space with no regulation and standardisation. It is indeed a difficult time for most of our members as we are excluded from the harmonised market.”

On solutions to the situation, Gwadabe said Nigerians should aspire to have a stable exchange rate devoid of illegal economic behaviour like arbitrages, hoarding and panic buying.

“ABCON is desirous to partner the apex bank and the Federal Government for an elaborate dialogue and engagement to champion paths to naira recovery.

“The financial architecture should be reviewed to include BDCs in the harmonised markets.

“The monetary and fiscal authorities should create enabling environment and friendly policies”, he said.

Also reacting, some bank officials said the Central Bank of Nigeria (CBN) decision to remove cash deposit limits on domiciliary accounts in June had led to the repatriation of funds through the banks, which in turn, they claim has resulted in the dollar surpassing supply significantly.

The CBN had in June, this year, in a circular, enabled free floating of the Naira against major global currencies.

Since then, free floating has almost translated into a free fall of the local currency, starting from  N471/$ it exchanged at the Investor & Exporter window to N664/$ the next day, and now a near N1000/$.