The naira yesterday dropped sharply to N330 against the dollar at the parallel market following the increase in petroleum pump price by the Federal Government.
It lost N8.00k or 2.48 percent yesterday compared to N322/$ the previous day. At the autonomous market, the local currency depreciated in value by N5.00k against the greenback, closing at N325/$ as against N320/$ the previous day.
The Federal Government on Wednesday after a meeting with stakeholders raised the price of Premium Motor Spirit (PMS) to N145.00k from N86.50k previously.
“The subsidy for petroleum motor spirit has been removed which is one the things that some of us have been agitating for. We also believe that will be followed with deregulation of foreign exchange market”, Johson Chukwu, chief executive of Cowry Asset Management told BusinessDay in an interview.
Reacting to the development, Aminu Gwadabe, acting president, Association of Bureau De Change Operators of Nigeria (ABCON) said the upward review of the petroleum products prices is laudable, however, the government needs to ensure further liberalisation of the foreign exchange market as the importers of the petroleum products will source their funding outside the official CBN window.
This he said is to avert the negative impacts and the demand pressure on the parallel market experienced when the restriction policy of 41 items was introduced in the economy. The extractive industries like the oil sector which accounts for over 70 percent of the illicit financial outflows in the economy.
According to him, there is the need for the CBN to urgently review and create secondary windows for the BDCS in other to create dollar liquidity in the currency market to assuage the envisaged run on the parallel/secondary forex market.
“The impacts of the review of the petroleum prices and signing of the budget have already started manifesting in the market as the value of the Naira further depreciate from 320/$ to 323/$ within the week”, he said.
In January, the central bank banned dollar sales to retail bureau de change and reduced supply at its official interbank forex market in an effort to conserve reserves, now at their lowest level, Reuters report.
Nigeria earns around 90 percent of its foreign exchange earnings from crude oil exports, but mismanagement of its refineries means it must also import expensive refined fuel, which eats deep into its reserves.
Before Wednesday when the government increased prices of fuel, Africa’s biggest economy suffered acute shortages of gasoline, causing motorists to queue endlessly for a fill-up.
