The naira firmed against the dollar at the parallel market on Wednesday following the Central Bank of Nigeria’s sales of about $80m to bureau de change operators, traders said.
Specifically, the naira rose to 219 to the dollar at the parallel market from 230 it recorded on Tuesday. The local currency, however, closed at 197 to the dollar on the interbank market, unchanged from the previous day.
The naira had weakened on the parallel market to as much as 245 to the dollar last month, on persistent dollar demand after central bank limited importers’ access to dollars on the official interbank market to buy a wide range of goods, in order to save its reserves.
The naira had rebounded from over 240 to 216 at the parallel market on Monday as Deposit Money Banks rejected cash deposits in dollars.
The Chief Executive Officer, First City Monument Bank Limited, Mr. Ladi Balogun, said banks were rejecting cash dollar deposits “due to large speculation on the currency.”
Banks are however receiving dollar transfers from other banks. Forex traders said banks were rejecting dollar deposits because there was excess liquidity of around $1bn at the parallel market.
Analysts expect the naira to continue rising, saying it is good for the economy.
The Head, Investment and Research, Afrinvest West Africa, Mr. Ayodeji Ebo, said the gains being made by the naira good for the economy, adding that it would help the CBN to gauge the true value of the currency in the event of a possible devaluation in the near future.
“If there is a convergence between the interbank and parallel market, the CBN may possibly review its restrictions imposed on the forex market,” he added.
A currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said if the trend continued, the naira might rise to as much as 200 against the dollar.
He believes this will help in checking the activities of market speculators.
Forex traders expect more dollar sales to boost activities and ease pressure.
“We are expecting about $80m dollar sales from the central bank today, which could further boost liquidity in the market and ease pressure,” one operator said.
Meanwhile, the Acting President, Association of Bureau De Change Operators, Aminu Gwadabe, said the central bank had put on hold its directive asking operators to request dollar buyers to provide their Bank Verification Number, a new biometric identification for banks customers.
The central bank had last month asked bureau de change operators to request dollar buyers to provide their BVN in a bid to curb speculative bids.
“The BVN exercise is put on hold and there is a huge market calmness,” Gwadabe told Reuters. “The naira is gaining strength, we expect it to close below 215 to the dollar,” he added.