Medical, School Fees, Mount Pressure On FX Market, Naira Slides Further

The Naira has depreciated by 2.5 per cent in one month as pressure from invisible transactions like school fees and medical allowances have destabilised the foreign exchange market.

Between August 1, 2024 and August 30,2024, the currency lost N40 despite the Central Bank of Nigeria intervention.

Checks by THE WHISTLER showed that the Naira traded at N1,600 on August 1, but traders at the black market exchanged the currency at N1,640 per dollar on August 31.

A trader in popular exchange hub in Zone 4, Abuja, Mustapha Alkali who spoke to THE WHISTLER blamed the fall on “pressures from travellers” and parents seeking to “pay fees” abroad.

Another trader, Usman, blamed the high prices on “difficulty in sourcing the dollar”.

He said Bureau de Change operators are not speculating on the currency, but “the demand has become high because many people are requesting for travel allowances. “

The pressure on the naira is also reflected in the price of the currency at the official Nigerian Autonomous Foreign Exchan Market where the currency fell by 1.52 per cent month-on-month.

On August 1, the dollar was sold at the MAFEM at N1,570 per dollar and the currency closed at N1593.93 per dollar.

Foreign exchange crunch has been a major challenge faced by the apex bank as it seeks ways to boost dollar supply into the country to save the naira.

Last month, the CBN approved the sale of $876.26m to 26 banks in a bid to stabilise the naira.

CBN said in a circular in August, “In line with the objective of the CBN to boost Fx liquidity to the market as well as promote price discovery, the bank approved a cutoff rate of N1495/US$ for the Retail Dutch Auction where bids valued at $876.26mfrom 26 banks qualified.”

The persistent depreciation of the naira also forced the CBN to intervene in the FX market with dollar sales to authorised banks worth $229.17m in July.

The National President of The Association of Bureau de Change Operators of Nigeria, Aminu Gwadabe advised the Central Bank should “resume dollar sales to checkmate the worrisome high price volatility

“The demand for invisible transactions like school fees, travel allowances, and medical expenses is very high as students are returning to school.”

Paul Alaje, Senior Economist and Partner at SPM Professionals told THE WHISTLER that investors have lost confidence in the economy.

He said one of the most important decisions that the CBN must take is for “the CBN to peg the naira before it is too late and we get to the situation of Zimbabwe.

“We don’t want anyone to get to a point where it will be a mess, and it’s getting close to it.”

Alaje said it was wrong for the government to remove subsidy and also float the Naira at same time

The economist said, “If you remove subsidy, your currency should be either fixed or managed float. So, what we should do first is to go back and peg the currency.

“If you peg your currency today to N1,000, some of the things that are expensive within six to nine months, the prices will come down.”