By Nse Anthony-Uko
ABUJA, (Sundiata Finance) — The Naira, on Tuesday traded at $1/N369 at parallel market for the second trading day this week despite CBN injection of $195 million.
The naira, at the official market closed at $1/N305.80, representing a slight drop compare to N305.75 exchanged last week. Against other currencies, Pound and Euro, the Naira sold at £1/N465 and €1/N408 respectively.
Also, at the Investors and Exporters Foreign Exchange (I&E FX) window, the naira fell to $1/N366.20 against the opening figure of $1/369.34 traded on Monday, according to data obtained from FMDQ OTC Securities Exchange website. The CBN in its efforts to bridge the gap between parallel market and foreign exchange rate has continued to intervene in the foreign exchange market.
Finance experts said the proportion of foreign exchange demand is greater than the supply side of the CBN. The Head, Research and Strategy at GTI Securities Limited, Mr. Chucks Anyanwu, said the increased importation of raw materials has continued to impact on the stability of the Naira.
According to him, “The demand side of foreign exchange continued to weaken the Naira against other currencies. We still import a lot of raw materials for industrial use, among others. The dwindling global oil prices continued to drag foreign reserves down despite CBN weekly intervention. Now, the foreign reserve is hovering around $30 billion and Nigeria is not getting enough supply.
“It is until Nigeria becomes an export dependent country where our export is more than import, the demand for foreign exchange currencies will continue to grow. CBN is trying to ensure that we have enough foreign exchange supply but it will never be at par with the demand whereby you will have $1/N10 because you have gotten an adequate supply side to demand,” he said.
He noted that the CBN is not supplying enough to make sure the parallel and official market rates are stable. “CBN does not have the capacity to supply enough foreign exchange to stabilize the market,” he added.
Financial Economist and associate Professor of Finance, Nasarawa State University, Dr Uche Uwaleke, had said the current demand side management involving foreign exchange access restrictions on items which can be produced locally should be sustained.
According to him, government at all levels must be seen to be supportive of efforts to boost local production, stressing that state governments for example have a role to play in boosting agriculture given their control over farm lands. He suggested that in order to enhance domestic production, conserve foreign exchange and boost economic growth, the following measures are recommended:
“The bank should pay more attention to agriculture in its intervention programmes since this sector remains the largest employer of labour in Nigeria and given the fact that a significant percentage of the current demand for Forex go directly to importing agricultural produce.
Generally speaking, it is the responsibility of government to provide the enabling environment for the realization of enhanced domestic production. The provision of enabling Infrastructure such as power and roads as well as a tax friendly environment is essential,” he said.