Rising forex demand for election spending by Nigerian politicians is further fueling pressure on the naira, particularly at the bureau de change segment of the market, BusinessDay finds.
Falling oil prices has obviously taken a toll on the local currency which further weakened to N172.50k per dollar at the BDC end on Monday – but politicians are mopping up as much forex at the black market, creating scarcity, fueling speculations, thereby intensifying pressure.
“The dollar is scarce in this market now- you cannot even find to buy because since last month politicians and government people have been coming here frequently to buy dollars they will spend for elections,” Nura Ibrahim, a money changer at the popular Abuja Zone 4 forex market told BusinessDay on Monday.
“For instance, a governor’s son came here on Friday and bought $300 million and we think he is going to use it for elections,” Nura said.
As the 2015 elections draw closer, mopping up forex by politicians is an anticipated phenomenon going by past trends- but the challenge seems further compounded by falling oil prices which hovers slightly above $80 per barrel.
The Central Bank of Nigeria (CBN) last week banned dollar sale to importers of telecom equipment, power generators and finished products at its foreign exchange auction in a panic policy it hopes will help maintain stability in the market, strengthen ailing naira and conserve foreign reserves.
The CBN has held to its commitment to continue to defend the naira, even in the face of dwindling reserves, however, acknowledging that the markets would determine how far this commitment goes.
The naira has lost around 6 percent so far, trading outside its preferred band for some time now, “but the bank will continue to defend the currency,” Sarah Alade, CBN deputy governor on economic policy insists.
Meanwhile, the naira on Monday depreciated across market segments following the inter-bank reforms by the Central Bank of Nigeria (CBN).
At the inter-bank market, the local currency lost N2.30k, as it closed at N168.10k/$ compared to N165.80/$ on Friday last week.
Naira on Monday weakened slightly by 5 kobo to N155.85k/$ as against N155.80/$ on Friday last week at the official market, while it lost N3.50 at the parallel market, closing at N174.50/$ compared to N171.00/$ last week Friday, according to data obtained from the Financial Markets Dealers Quotations (FMDQ).
The CBN on Monday reduced the amount of dollar offered at the Retail Dutch Auction System (RDAS) by 33.3 percent to $200 million from $300 million offered on Wednesday last week.
Consequently, the CBN on Monday offered a total of $200 million but sold a total of $199.75 million to some deposit money banks at the rate of N155.85/$ at the RDAS.
