Nigeria’s foreign exchange (FX) market is facing renewed turbulence as the naira continues to depreciate against the U.S. dollar. Despite the Central Bank of Nigeria (CBN) directing commercial banks to supply forex to Bureau De Change (BDC) operators, reports indicate that BDCs are not receiving dollars. This shortfall is fueling currency speculation, reducing investor confidence, and further weakening the naira.
Naira Faces Steep Decline Amid Forex Shortages
In the past week, the naira plunged to ₦1,580/$ in the parallel market; a 3.5% drop in just one day. Even in the official exchange market, the naira depreciated by ₦43 within a week, highlighting growing volatility in Nigeria’s FX market.
Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria (ABCON), warns that the lack of forex supply, unfavorable exchange rates, and business uncertainties are contributing to speculative trading, which continues to push the currency downward.
Declining T-Bill Yields Further Threaten the Naira
Another major concern is the declining yields on Nigerian Treasury Bills (T-bills). According to Ayodeji Ebo, Managing Director at Optimus by Afrinvest, lower T-bill yields make Nigeria less attractive to Foreign Portfolio Investors (FPIs), leading to reduced dollar inflows.
With fewer investors bringing in forex, the naira remains vulnerable to further depreciation. Analysts note that reduced investor confidence and speculation are exacerbating the currency’s weakness.
BDC Operators Demand Urgent Policy Reforms
Gwadabe has urged the CBN to refine its forex policies to ensure that banks transparently sell dollars to BDCs as intended. He also advocates allowing licensed operators to import dollar cash to ease the liquidity crisis.
Beyond forex interventions, he calls on the government to declare a state of emergency on inflation, emphasizing that rising prices are a significant threat to economic stability.
Conclusion
While the CBN has taken steps to stabilize the FX market, the persistent shortage of dollars for BDCs raises concerns about policy effectiveness. If swift action is not taken, naira volatility could continue, making currency stability harder to achieve.