Feb (Lagos) - Naira closed at 370 against 1 USD on Friday after touching 400 earlier in the day. In the parallel market the seller is the price maker and can demand whatever he thinks he can get on the day based on the demand factor.
So the current situation of the Naira is not real, it is a direct result of sharply reduced Dollar supply from the Central Bank.
The factor compounding the effect is the low interest rate policy of the CBN. Even the previous administration increased the benchmark lending rates in 2011 to protect the Naira against currency shocks then. But right now it is the opposite strategy being adopting which is clearly not working.
The Naira can return to 220 levels very soon if the CBN had enough Dollars to supply the buyers of the 41 items it has blacklisted.
Until the importers of the 41 items on that blacklist start getting regular Dollar supply this current situation will continue.
There is artificial dollar demand due to the same situation because speculators know that they can just buy Dollars today and sell after one or two weeks for a profit.
The CBN needs to really call an emergency meeting and discuss these arbitrage situations which are popping up due to the dual markets for the Dollar in Nigeria right now. Another scenario is someone just going to Dubai with Nigerian bank issued Debit Card to withdraw dollars there and bring them back to Nigeria to sell at a higher rate. Although the CBN has controlled this scam by reducing the limit of international currency withdrawal on debit cards the opportunity exists for more sophisticated speculators.
CBN must act.
reporting for easykobo.com on Saturaday, Feb 20 2016 from Lagos, Nigeria
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