The naira yesterday closed at N1,240 to dollar in the parallel market. It closed at N1,245 to dollar on Wednesday, representing N5 to dollar appreciation.
The local currency has of recent commenced rapid recovery, as volatility in the market dropped after the Central Bank of Nigeria (CBN) commenced dollar sales to bureau de change operators, reports The Nation.
The CBN had directed that all authorised dealers pay Personal and Business Travel, allowances (PTA/BTA) to their customers through electronic channels only, including debit or credit cards instead of cash.
“In line with the Bank’s commitment to ensure transparency and stability in the foreign exchange market and avoid foreign exchange malpractices, All Authorised Dealer Banks shall henceforth effect payout of PTA/BTA through electronic channels only, including debit or credit cards. For the avoidance of doubt, payment of PTA/BTA by cash is no longer permitted,” the bank said.
Importers are finding it increasingly difficult to secure the necessary funds from the official FX market and black market.
Legitimate needs driving the demand include Form A applications for Business Travel Allowance (BTA), Personal Travel Allowance (PTA), school fees, and medical fees. Small and Medium Enterprises (SMEs) are also grappling with the scarcity, as highlighted by the use of Form Q.
“The problem is that dollars are scarce in the market. People are not bringing dollars and demand is so high that is why the price is going up,” a street trader told Business Day on Tuesday morning.
Association of Bureaux de Change Operators of Nigeria (ABCON) President, Dr. Aminu Gwadabe, said aside monetary policy tightening that led to interest rate hike and more investment in government instruments and clearance of $7 billion forex backlog forward commitments, the recall of the BDCs has significantly boost dollar liquidity at the retail end of the forex market.
Gwadabe therefore expressed ABCON’s gratitude to the Cardoso-led CBN and other related agencies for the recognition of BDCs as the third leg of the foreign exchange market and an effective exchange rate transmission mechanism in forex management.
He said: “The reconsideration of the BDCs into the main stream foreign exchange market has not only demystified illegal economic behaviours such as hoarding, rent seeking, round tripping and FX holding position, but also led to the emergence of exchange rate convergence.”
Gwadabe said that the stability in exchange rate has already started to have positive impact on the prices of goods and services. For instance the price for international school fees has dropped by 15 per cent; cost of medical tourism reduced by 20 per cent and prices of air fares for local and international trips dipped by 25 per cent.
He said: “The current developments in the foreign exchange market has started reigning in inflation as prices of most necessities are becoming relatively lower in the market. In a most serious note, the positive impacts include also heighten confidence of the public in the local currency as it eliminates currency substitution behavior which hitherto being adding pressure on our local currency”.
