Foreign currency speculators, who launched an
unprecedented attack against the naira in the last
two weeks, got their fingers burnt on Tuesday
when the nation’s currency staged a major
recovery, rising to N310 to a dollar at the close of
business, compared to N375 at which it sold on
Monday.


The naira fell to an all-time low of about N400 to
a dollar on the parallel market last week fuelling
concerns that it would plummet further to N450-
N500/$ this week.


But findings from THISDAY showed that the naira
defied expectations, climbing to as high as N305
to the dollar at some parallel market points in
Lagos on Tuesday afternoon, before settling at
N310.


Forex dealers and currency analysts attributed the
significant gain on the parallel market to excess
supply of the greenback in the market, even as it
looked like a lot of speculators lost the shirts on
their back.


THISDAY gathered from a reliable source that
speculators who thought that by attacking the
currency last week, coupled with misplaced
concerns that the Central Bank of Nigeria (CBN)
was going to stop the allocation of forex for
school fees and medical bills abroad, this would
compel the central bank and President
Muhammadu Buhari to alter their stance against
the devaluation of the currency.


But they were disappointed when Buhari, in Egypt
at the weekend, adamantly ruled out the
devaluation of the naira on the grounds that
Nigeria does not have the competitive advantage
to benefit from an official currency adjustment.
Reacting to the president’s stance, speculators
who had been betting that the naira would
depreciate further, started dumping the dollars
with reckless abandon, effectively creating excess
supply of the greenback in the parallel market.
Commenting on the situation in the secondary
forex market, the chairman, Association of Bureau
de Change Operators of Nigeria (ABCON), Alhaji
Aminu Gwadabe, said: “The market is moving
from perception to reality.”


Similarly, an analyst at Ecobank Nigeria, Mr. Kunle
Ezun, predicted that the naira would edge higher
in the coming days.


“We expect that the naira would appreciate
further. We have always said that what happened
last week was purely a speculative attack.
Some people felt that if they pushed the naira
down to that level, they could force the CBN to
devalue, so that when the naira is devalued and
the gap widens further, they would now bring out
the dollar cash to make a kill,” Ezun said.


He however urged the fiscal authorities to
introduce policies that would help stimulate
economic activities, saying that the fundamentals
of the economy were still weak.


ABCON also aligned with the federal government’s
decision not to further devalue the naira.
Gwadabe said this at a media briefing, pointing
out that devaluing the naira would create more
problems than it would solve.


He said that as a way of enhancing transparency
in the BDC sub-sector, his association had
decided to introduce a forex rate band weekly.
This rate band is expected to serve as a guide for
all BDCs and the public on the prevailing
exchange rate across the country, he added.
In addition, it will be operated in line with the
regulated forex rate in the economy.


“This is to forestall exploitation of forex end users,
and also to ensure that end users are informed to
avoid falling victims of exploitation.
“The band will be announced via weekly press
releases that will be circulated to the media for
publication.


“ABCON will introduce a series of measures
aimed at transforming the operations of BDCs in
Nigeria to align with global best practices. These
include: review and updating of BDC operational
manual; introduction of live trading platforms;
automation of all transactions and documentation
requirements; and increased partnership with the
CBN and other relevant agencies.


“Further, as part of its responsibility as a self
regulatory organisation (SRO), and also in
continuation of its aim to transform its members
to compete within the global regulatory currency
market, ABCON will seek the approval of relevant
monetary and fiscal authorities as well as
partnership for effective use of the nation's
external reserves to enhance domestic trade and
foreign exchange management.


“To this end, our website and internet platforms
will be developed to position BDCs to serve as
agents of Western Union and currency
auctioneers.


“We would also develop platforms that will allow
our members to access sources of autonomous
foreign exchange like govt agencies, embassies,
IOCs and export proceeds, etc,” he explained.
He also urged the federal government to introduce
policies that would diversify the economy to
increase non-oil export earnings, and reduce
imports.


This, according to him, would lead to increased
foreign exchange inflow and a reduction in
demand for foreign exchange.


In addition to policies that would diversify the
economy, ABCON suggested that the CBN should
review the policy of dollar importation into the
economy for the purpose of defending the naira.
According to the association, the central bank
should introduce a policy whereby the naira is
used to intervene in the real sectors of the
economy to boost productivity.


Furthermore, Gwadabe said as a way of reducing
demand for dollars, the CBN should explore the
option of promoting the use and acceptability of
naira for transactions within the West African sub-
region.


He added: “We observe that this is already
happening at the level of informal trading activities
within the sub-region, and it is our belief that this
can be replicated at the level of formal economic
activities.”


Meanwhile, the Chairman of Stanbic IBTC Holdings
Plc, Mr. Atedo Peterside, has expressed concern
over the uncertainty arising from the federal
government’s foreign exchange policy, warning
that it is threatening macroeconomic stability in
the country and is unsustainable.


He stated this yesterday at the 2016 Standard
Bank West Africa Investors’ Conference tagged,
“Unlocking Nigeria’s Potential…Growth through
Diversification”


He said the federal government’s foreign
exchange policy is the biggest uncertainty facing
the country today following the lack of economic
policy direction and the likely composition of
Buhari’s economic team for much of the third and
fourth quarters of last year.


According to him, “The argument at stake is not
whether to devalue or not because there has
already been an effective devaluation.


www.thisdaylive.com/articles/speculators-get-their-fingers-burnt-naira-strengthens-to-n310-/232783/