Speculative Attack Weakens Naira to over N500 Mark on Parallel Market

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  • CBN Official: Gamblers will lose their money

By Obinna Chima

The Naira attained a new low of N506 against the United States dollar on the parallel market yesterday, compared with the N500 to a dollar it closed the previous day.
The development was attributed to the activities of currency speculators who are desperately in search of exit strategies to reduce their dollar position.
Meanwhile, an official of the CBN who pleaded not to be named has warned speculators that they will lose their money as the country’s foreign reserves continue to rise.
Also, a currency trader who pleaded to remain anonymous argued that there was likelihood that the currency speculators are scared that the successful Eurobond issuance by the federal government would help improve dollar liquidity in the country, thereby hampering their nefarious activity.
But on the Bureau de Change (BDC) segment, the Naira was quoted at N399 to the dollar, just as on the official interbank market, it stood at N315 to the dollar yesterday.

Speaking in a phone interview, the President, Association of Bureau de Change Operators of Nigeria (ABCON), Mr. Aminu Gwadabe, also blamed the further drop in the value of the naira on the black market on the activities of currency speculators.

“In any case, that is only hap- pening in the shallow parallel market. The BDC sub-market FX rate is stable and the interbank is also stable. Don’t forget that the Central Bank of Nigeria is also working to improve liquidity. The CBN has increased the allocation to manufacturers from $1 billion monthly to about $1.2 billion monthly.
“The central bank also told us recently that it was working on reducing the requirements for International Money Transfer Operators (IMTOs), so that there would be improved liquidity in the economy. We have a lot of Nigerians in the Diaspora and licensing more IMTOs would help improve dollar flows into the country,” the ABCON boss added.
Nigeria’s forex reserves is currently at $28.699 billion. The federal government on Thursday announced that its US$1 billion Eurobond was 780 per cent oversubscribed, demonstrating a strong market appetite for Nigeria.

The government also revealed that the newly established US$1 billion Global Medium Term Note programme will bear interest at a rate of 7.875 per cent and will mature on 16th February 2032, with a bullet repayment of the principal.

Nonetheless, the yield of 7.875 per cent on the $1 bil- lion Eurobond showed that investors priced in the risk of the credit downgrade by Fitch recently. Nigeria intends to use the proceeds of the notes to fund capital expenditure in the 2016 budget.

The Director of Information in the Ministry of Finance, Mr. Salisu Na’inna Dambatta said: “The development was clearly a sign of renewed confidence in the economy which has been hurt by the slump in crude oil prices.”

The notes, according to a statement represented the country’s third Eurobond is- suance, following issuances in 2011 and 2013.