Dollar Drops Below N400/$ for First Time in Seven Months
For the first time in seven months, the dollar fell below the psychological N400 barrier, when the greenback traded at N399 to the dollar in Lagos and exchanged at N395 in Abuja, lower than N410 at which it traded on Tuesday, ThisDay reports.
With the gains made by the local currency in the last five weeks, the naira inched closer to one of the Central Bank of Nigeria’s (CBN) key foreign exchange policy objectives of an exchange rate convergence.
The naira trades for N375 to the greenback for invisibles and at N307 to the dollar on the FX interbank market, the official window for manufacturers and importers of raw materials eligible to buy FX from this segment of the market.
The last time the naira traded at between N395 and N400 to the dollar on the parallel market was in August 2016. The significant gains made by the naira on the parallel market, according to market analysts, was a reflection of the improved confidence in the FX market, following the sustained dollar interventions by the CBN since last month.
One analyst also attributed the gains made by naira to the Bureau de Change (BDC) operators that are awash with dollars and with little or no customers to patronise them.
He said several retail customers who used to resort to the BDCs (which realistically fund the parallel market) to fund invisible transactions now get to buy dollars at a lower rate from the banks.
“The BDCs are awash with cash. Remember that the central bank sold about $200,000 to each BDC at some point and they had also bought dollars at high rates which they hoarded, thinking that the naira would remain in a free fall.
But with the CBN’s intervention, they are stuck with loads of dollars and little or no customers, so they have stopped buying dollars and are looking for avenues to offload what they bought at ridiculously high rates.
Essentially, the speculative attacks on the naira has come back to haunt them and they’ve got their fingers burnt,” he said.