Nairametrics| The Central Bank of Nigeria is currently in a state of flux. Despite billions sold defending the Naira, the parallel market seem to be on a steady path towards depreciation. The CBN is now scrambling for a response to gain back control of the narrative.
A recent article from Thisday, may well have provided the Apex bank with a set of theories that could explain why the exchange rate continues to depreciate on the black market and why there is probably nothing the CBN can do.
Plausible reasons according to a Thisday article
- Currency speculators are conniving with bank officials to generate fake airline tickets, giving them access to the parallel market where they offload and make a spread.
- Thisday also alleges that some commercial banks are hoarding dollars in order for them to sell in the black market. This is what analysts call roundtripping.
- The increased demand for FX is like being driven by illicit funds from corrupt public officials as well as some Nigerians who rather purchase forex in the black market A
- As per illicit funds, the seekers of FX are ready to pay any amount to launder stolen money.
- They also suggest currency speculators are selling propaganda alleging that the CBN is not selling FX to BDCs and as such cannot sustain its policy of selling dollars to the retail end of the market.
We had identified some of these issues in past articles in Nairametrics and suggested that the CBN ignores the fight with the black market. Rather, it should focus on ensuring that Nigerians with legitimate needs have access to forex whenever they need from commercial banks and authorised currency dealers. The CBN should also abandon its policy of fixing the exchange rate and should instead focus on allow a market determined price even it is set within a currency band. It can then intervene whenever it feels the price is depreciating beyond its target price.
It is also time that the CBN names and shames commercial banks and their officials who have and are engaging in forex manipulation and round-tripping. They know who these perpetrators are should force their employers to take action.