The wide gap in the naira/dollar exchange rates in the different segments of the foreign exchange market is likely to be reduced when the Central Bank of Nigeria (CBN) resumes forex sales to Bureaux De Change (BDC), analysts at Cowry Asset Management Limited have said.
In the wake of measures introduced by the Federal Government to contain the spread of the coronavirus (Covid-19) pandemic, which included the banning of domestic and international flights, the CBN had on March 26, suspended the sale of forex to BDCs.
Analysts said the BDCs’ absence from the forex market was a key factor in the naira’s plunge against the dollar on the parallel market
While the naira/dollar exchange rate on the official window and the Investors and Exporters(I&E) window is N380 per dollar and N386/$1 respectively, the local currency trades at 477 per dollar on the parallel market.
However, as part of its gradual lifting of coronavirus restrictions, government recently announced that international flights would resume on August 29. The CBN has said that it is likely to resume forex sales to BDCs once international flights resume.
Cowry Asset Management Limited said is a report yesterday that the widened disparity between different exchange rates should shrink if CBN reintroduces the sale of foreign currency to Bureau De Change.
“We note that the increased net forex inflow into Nigerian economy in April 2020 may not be sustained going forward as the gradual reactivation of local economic activities, especially reopening of international flight, and possible reintroduction of the sale of foreign currency to BDC in order to suppress further depreciation of the Naira against the USD would increase the need for forex,” they noted.
