Reports suggest foreign exchange dealers in Nigeria are drawing up a proposal that will persuade the CBN to ease some of the restrictions it placed on forex trades. If this happens, it could lead to a drop in the value of the naira and potentially another devaluation of the naira.
The move amongst others is perhaps to ensure that the secondary market is revived and liquidity is re-injected into the market. With the secondary market basically dried up, operators are likely to run out of business if things don’t change soon enough.
The CBN had late 2014 and early 2015 issued several policy circulars aimed at curbing speculation and pressure on the naira, a situation that had caused them to devalue the currency.
One of the policies circulars issued was a restriction of dollar sales at the interbank market, a move that had JP Morgan threaten to yank Nigeria off its index.
According to Reuters;
Two members of Nigeria’s Financial Market Dealers Association (FMDA) said they were finalising proposals “to find a way to resolve the problem of liquidity and curb speculation.” Another source with direct knowledge of the matter said that the central bank was aware of the talks by the dealers.
Analysts predict any relaxation of the current restrictions placed by the CBN will ultimately result in a drop in the value of the naira, making us wonder whose interest the dealers are really protecting. However, if speculation is indeed curbed then one will hope that the anticipated slide in the value of the naira will not lead to a further devaluation.