Naira stability: CBN, speculators engage in battle of minds

By Moses Obajemu

Currency speculators and the Central Bank of Nigeria may be spoiling for confrontation over the former’s perfected plans to engineer panic in the forex market which may send the naira on a free fall and obliterate the apex bank’s efforts of many years to give stability to the naira.

The outbreak of COVID-19 and its negative effects on oil prices have provided the platform for the speculators to manipulate the market and they quickly swung into action such that by the close of last week, the naira had fallen to N420 to a dollar in the bureau de change segment of the market. The naira also suffered depreciation of N8.50 against the US dollar in the parallel market since 2017, exchanging at N367 to a dollar from N358.50.

At the Investors & Exporters (I&E) window, the exchange rate jumped to N368.33 per dollar from N366.75, losing N1.58, the biggest daily depreciation since 2017, when the window was introduced.

They played on the drastic decline in crude oil price to push their narrative of an impending naira devaluation, thus instigating panic buying of the dollar last week.

Shedding light on the panic-induced buying, Aminu Gwadabe, the president, Association of Bureaux de Change Operators of Nigeria, said the crude oil prices which fell drastically in the international market to as low as $35 per barrel, raised speculations among the BDC operators and Nigerians in general.

He said this caused speculations in the market which were not necessary.

Gwadabe said, “With the fall in crude oil prices on Monday, we witnessed a lot of foreign portfolio investors dropping their assets, most especially to convert to cash.

“The movement was as a result of recklessness on the side of the operators, when they want to speculate, but there is no reason for such because the Central Bank of Nigeria had continued to maintain support for liquidity to the BDC sub-sector,” he explained.

Gwadabe who disclosed that the dollar sold for as high as N400, however said sanity was gradually returning to the sector as it sold for N375 by the close of last week.

In order to nip the speculative trading in bud and starve it of the steam it needs to gather momentum, the apex bank has threatened to deal decisively with any group of speculators found to be behind the rumour.

According to Isaac Okorafor, the director, corporate communications, CBN, “Market fundamentals do not support naira devaluation at this time,” he said in a statement.

“The CBN has not devalued the naira. Consequently, the CBN will invoke the full weight of applicable sanctions on any persons and authorized dealers found to be involved in such disruptive and speculative market behaviour.

“The Central Bank of Nigeria (CBN) wishes to note with displeasure, the rumours and speculative activities of unscrupulous players in the foreign exchange market, borne out of the impression that the CBN is on the verge of devaluing the naira, and triggering panic in the FX Market.

“These rumours are false, unwarranted and calculated to serve their dubious and selfish ends,” he further stressed.

Okorafor said the CBN had begun a robust and coordinated investigation in collaboration with the Nigerian Financial Intelligence Unit (NFIU) and related agencies to uncover the unscrupulous persons and forex dealers who are creating this panic, adding that the full weight of the rules and regulations will be meted out to them, including, but not limited to, being charged for economic sabotage