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Forex: CBN Intervenes, Raises Dollar Supply

Sanusi Lamido, CBN Governor
Apparently concerned by the rising demand for the United States dollar at the foreign exchange (forex) market, the Central Bank of Nigeria (CBN) Monday increased its supply of the greenback at its regulated Wholesale Dutch Auction System (WDAS) by 60 per cent to a total of $400 million.

But the demand for the dollar at the bi-weekly auction climbed further by 50 per cent, to a total of $545.5 million Monday, compared with the $362 million recorded at the previous auction.
The value of the naira slipped slightly due to the strength of the unmet demand at the WDAS. It dipped by 15 kobo to N150.26/$1 compared with the N150.11/$1 it stood at last Wednesday.
However, data by Financial Market Dealers Association (FMDA) showed that the local currency maintained its Friday’s value of N165/$1 at the parallel market. It also stood at N164.50/$1 at the Bureau De Change (BDC) section of the market.
Operators have continued to express concern over the disparity in the value of the dollar between the official and parallel markets. This, they alleged, had resulted into round tripping in the system.
An analyst and Head of Research, BGL Plc, Mr. Olufemi Ademola, argued that because of the volatility in the other market, especially the stock market, investors might be pulling out of equity market for other investment opportunities where returns were higher.
Ademola, who spoke in an interview with THISDAY, insisted that the parallel market of the forex market reflected its real volume of demand and supply.
He explained: “There was rumour in the market sometimes last month that the CBN was planning to devalue the naira and so there may be speculative trading in the market. You can’t speculate in the official market because of the CBN regulations, but you can do that in the parallel market. The parallel market measures the true movement of demand and supply of the market.
“We have noticed that there are some periods of the year that demand usually go up because Nigeria will always travel. Summer period is one of such periods. Again, around September, you see a lot of pressure, particularly on the pounds. In December when most Nigerians living abroad come back, the naira appreciates because they will come back with dollar to celebrate the yuletide.”
He stressed that with the country’s robust oil revenue, which he argued were enough resources to demand and supply at the market and the new CBN policy, which lifted the restriction on bond holdings, there would soon be inflow of funds into the system.
Managing Director and Chief Executive Officer, Slamad Bureau De Change Limited, Mr. Amaeze Olisaemeka, urged the apex bank to raise the amount of dollar available to BDC operators.
“The CBN has a very good intention for the market, but we are appealing for an increase in the supply side of the market, either at the WDAS or from banks,” he said.

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