Nigeria: New CBN Policy Firms Up Naira Value in Parallel Market

3 December 2020

The Nigerian currency, Naira, yesterday reversed its two weeks depreciation trend in the parallel market, recording N20 gain against the United States Dollar closing at N470 per dollar.

Meanwhile the Central Bank of Nigeria, CBN, has directed all banks' Managing Directors to immediately close all Naira Ledger Accounts meant for receiving proceeds from the International Money Transfers Operators, IMTOs.

The Naira had earlier depreciated by N30 against the dollar, as the parallel market exchange inched closer to N500 per dollar on Monday November 30th from N470 per dollar on Friday November 20th 2020.

But the new rules introduced by the CBN on Monday November 30th, which allowed beneficiaries of diaspora remittances and foreign exchange transfers into domiciliary account, to collect the proceed in foreign currency cash, halted the dwindling fortunes of the local currency.

As a result the Naira gained N10 against the dollar on Tuesday December 1st as the parallel market exchange rate dropped to N490 per dollar from N500 per dollar on Monday.

This trend continued yesterday morning, howbeit on a larger scale, as the parallel market exchange rate further dropped to N470 per dollar from N490 per dollar previous day, translating to N20 appreciation for the dollar. Thus, the naira had reversed the N30 loss against the dollar since November 20th, 2020.

The sharp appreciation of the Naira according to Aminu Gwadabe, President Association of Bureaux De Change Operators of Nigeria (ABCON) shows the effectiveness of the new CBN rule on the receipt of diaspora remittances.

He stated: "Certainly, those hoarding foreign exchange better sell now otherwise they will lick their wounds."

Commenting further on how the new rule will impact dollar supply and the activities in the BDC subsector, Gwadabe said: "The monopoly of (banks) is broken and the policy will induce liquidity in the BDC subsector.

"Nigeria is expected to close the year with over $20 billion diaspora remittances despite the pandemic in 2020.

"The beneficiary is free to collect his proceeds in foreign currency cash and trade it in the BDC subsector which will lead to true price equilibrium in the market."

Meanwhile, in a circular to all banks' Managing Directors, the CBN noted that beneficiaries of IMTO were to receive their proceeds in foreign currency (dollar) or have it deposited in their domiciliary account in a Nigerian bank.

The circular issued and signed yesterday by Director Banking Supervision, CBN, Bello Hassan and Director Trade and Exchange, CBN, Dr. Ozoemena Nnaji stated: "Following our Circular Ref. No. TED/FEM/FPC/GEN/01/011 of November 30, 2020, regarding operations of diaspora remittances, all banks are hereby directed to close all Naira Ledger Accounts opened specifically for the purpose of receiving IMTO proceeds with immediate effect.

"In addition, please note that IMTO beneficiaries/recipients are to receive their proceeds in foreign currency (USD) or have it deposited in their domiciliary account in a Nigerian bank. It is at the sole discretion of the recipients to either choose foreign currency cash or have the proceeds deposited into their domiciliary accounts in Nigeria. Please confirm compliance with this directive to the CBN by close of business today, December 2, 2020."

Vanguard News Nigeria

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